Annual Financial Report

RNS Number : 3393H

Alpha Pyrenees Trust Limited

13 March 2015

ALPHA PYRENEES TRUST LIMITED
("ALPHA PYRENEES TRUST" OR THE "TRUST" OR THE "COMPANY")

ALPHA PYRENEES TRUST POSTS RESULTS FOR THE YEAR ENDED 31 DECEMBER 2014:

DISPOSAL OF THREE PROPERTIES AT OR ABOVE BOOK VALUE AT THE DATE OF SALE

106,165 SQUARE METRES OF LEASE EXTENSIONS AND NEW LEASES

NET ASSET VALUE 6.0p PER SHARE (ADJUSTED)

Alpha Pyrenees Trust Limited, the property company investing primarily in commercial real estate in France, today posts its results for the year from 1 January to 31 December 2014.

The Trust announced an adjusted loss of £3.8 million for the year, representing an adjusted loss per share of 3.3p and an adjusted net asset value of 6.0p per share. The Trust does not currently propose to pay dividends.

Dick Kingston, Chairman of Alpha Pyrenees Trust, commented:

"Following the agreement with Barclays in February 2015, the maturity of the Trust's existing borrowing facilities has been extended to the 11 May 2015. This extension provides additional time for the Trust to progress refinancing options including the potential refinancing of assets by third party lenders and potential asset sales. Given the current economic environment and the maturation of the Group's bank borrowings the Board has decided that to enable repayment of the bank borrowings and protect shareholder value the Trust will continue to seek the support of its lender in an orderly realisation of its investment property while all alternative options continue to be explored. During the year, the Investment Manager has continued to focus on active asset management within the portfolio with particular emphasis on the extension of lease terms and the letting of vacant units to secure the Trust's income. The Board is pleased to note the important progress achieved on this front and is also pleased to note the achievement of the disposal of three of the Trust's properties at or above book value. The Trust's adjusted earnings have been impacted by a combination of reduced net income due to asset disposals, tenants' lease breaks and increased finance charges. The decrease in the adjusted net asset value during the period is primarily due to the revaluation of investment properties combined with the loss incurred in the period and adverse foreign exchange effects."

Paul Cable, Fund Manager, Alpha Real Capital LLP, commented:

"The Trust owns a diversified portfolio of properties focused primarily on the French property market which represents 92% of the total portfolio by value with 84% by value located in the economically important and stable Ile-de-France region. Despite the continued low growth in the French economy and the challenging business environment this creates, since 1 January 2014 new leases or lease extensions were achieved on 106,165 square metres representing around 42% of the portfolio by area. Included in this total is the Trust's largest property, Villarceaux-Nozay, representing around 50% of the Trust's total portfolio by value, where a new 12 year lease with a fixed term of 9 years was agreed with Alcatel-Lucent. Of the Trust's current rent roll, 86% is secured by leases to Grade A tenants. The Investment Manager will continue to concentrate on active asset management and property management initiatives to secure the Trust's income while pursuing asset sale opportunities."

Contact:

Dick Kingston
Chairman, Alpha Pyrenees Trust Limited
01481 231100

Paul Cable
Fund Manager, Alpha Real Capital LLP
020 7391 4700

For more information on the Trust please visit www.alphapyreneestrust.com.

For more information on the Trust's Investment Manager please visit www.alpharealcapital.com.

FORWARD-LOOKING STATEMENTS

These results contain forward-looking statements which are inherently subject to risks and uncertainties because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements are based on the Board's current view and information known to them at the date of this statement. The Board does not make any undertaking to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Nothing in these results should be construed as a profit forecast.

About the Trust

Alpha Pyrenees Trust Limited ("the Trust" or "the Company") primarily invests in higher-yielding properties in France, particularly in the Ile-de-France region around Paris, focusing on commercial property in the office, industrial, logistics and retail sectors let to tenants with strong covenants.

The Trust seeks to diversify risk by investing in a portfolio of properties spread across different property sectors with a variety of tenants.

Dividends

The Trust does not currently propose to pay dividends.

Listing

The Trust is a closed-ended Guernsey registered investment company which has been declared under the relevant legislation to be an Authorised Closed-Ended Collective Investment Scheme. Its shares are listed on the Official List of the UK Listing Authority and traded on the London Stock Exchange.

Management

The Trust's Investment Manager is Alpha Real Capital LLP ("the Investment Manager"). Control of the Trust rests with the non-executive Guernsey-based Board of Directors.

ISA/SIPP status

The Trust's shares are eligible for Individual Savings Accounts (ISAs) and Self Invested Personal Pensions (SIPPs).

Website

www.alphapyreneestrust.com

Financial highlights

	Year ended 31 December 2014	Half year ended 30 June 2014	Year ended 31 December 2013	Half year ended 30 June 2013
Net asset value (adjusted) (£'000)*	7,018	14,089	26,834	33,509
Net asset value per ordinary share (adjusted)*	6.0p	12.0p	22.8p	28.5p
Net asset value per ordinary share	2.5p	5.3p	12.7p	14.7p
Earnings per share (adjusted - basic & diluted)**	(3.3)p	(1.3)p	0.1p	0.2p
Earnings per share (basic & diluted)	(9.8)p	(8.5)p	(4.7)p	(2.3)p

*The net asset value and net asset value per ordinary share have been adjusted for the fair value movement on revaluation of the interest component of the currency swap (up to maturity in October 2013 at which point this element unwound), the interest rate swap derivatives and 50% of the deferred tax provisions; full analysis is given in note 10 to the accounts.

**The adjusted earnings per share includes adjustments for the effect of the fair value mark-to-market revaluation of the properties, currency swap (settled in October 2013) and interest rate swap derivatives, deferred tax provisions, capital element of investment managers fee, rental guarantee income and foreign exchange gains and losses. A full analysis is given in note 9 to the accounts.

Chairman's Statement

The Trust has continued to focus on active asset management within the existing portfolio with particular emphasis on the extension of lease terms and the letting of vacant units to secure the Trust's income. The Board is pleased to note the important progress achieved on this front, most notably at the Trust's largest property, Villarceaux-Nozay, where a new long term lease was negotiated with Alcatel-Lucent in return for agreed works to accommodate their consolidation of staff on site from another Paris region facility. Since 1 January 2014 new leases or lease extensions were achieved on a total of 106,165 square metres within the current portfolio representing around 42% of the portfolio by area. Further detail on asset management progress appears in the Property Review section. Going forward, the Trust is also focused on asset sales that reduce the level of the Trust's bank borrowings. Three sales were completed in the year at or above their book values at the date of sale and the proceeds from these sales are held within the cash pooling arrangement established with the Trust's lenders, Barclays Bank PLC, to provide security for its loans and working capital for the Trust's operations.

Going concern

Given the current economic environment and the maturation of the Group's bank borrowings on 11 May 2015 the Board has decided that to enable repayment of the bank borrowings and protect shareholder value the Trust will continue to seek the support of its lender in an orderly realisation of its investment property while all alternative options continue to be explored. Hence, at this time, the accounts are not prepared on a going concern basis as noted within the accounting policy section in the notes to these financial statements.

Results and dividend

Results for the year show an adjusted loss of £3.8 million (2013: earnings of £0.1 million) and adjusted loss per share of 3.3p (2013: adjusted earnings per share of 0.1p) (note 9). Earnings have been impacted by a combination of revenue losses due to asset disposals (mainly Vitry and Gennevilliers) and tenants' breaks together with increased finance charges (following the financing of the hedge liability in November 2013).

The challenging business climate has created an environment where generally the corporate decision making process has been extended and hence leasing transactions take longer to complete. The Trust currently has vacant space with an estimated annual rental value of approximately £3.4 million (€4.4 million) and against this backdrop it remains difficult to predict the timing and level of re-leasing that will be achieved.

The Trust does not currently propose to pay dividends.

Revaluation and Net Asset Value

Investment properties are included in the balance sheet at an independent valuation of £212.2 million (€271.2 million) providing an average gross valuation yield across the portfolio of 8.3% as at 31 December 2014. The portfolio valuation has decreased by 3.6% compared to 31 December 2013 on a like for like basis taking into account the asset sales that have completed in the period. The next revaluation will take place as at 30 June 2015.

The portfolio totals approximately 250,180 square metres (approximately 2.7 million square feet) and many of the tenants are well known companies belonging to large groups with strong covenants such as: Alcatel-Lucent, Aviva, BNP Paribas, Dia, Etanco, Furnotel, Klöckner Group, MediaMarkt, McDonalds, Norauto, OCP and Vinci Group. Grade A tenants also include government or quasi-government bodies and together the rent from such tenants accounts for 86% of the Trust's rental income.

The weighted average lease length within the portfolio is currently 10.3 years to expiry and 6.7 years to the next break.

As at 31 December 2014, the adjusted net asset value per ordinary share is 6.0p (31 December 2013: 22.8p per share) (note 10). The decrease in the period is primarily due to the revaluation of investment properties combined with the loss incurred in the period and adverse foreign exchange effects.

Portfolio Summary

Country	Property	Sqm	Description	Valuation £m	Valuation €m
France	Villarceaux-Nozay	82,320	Business park	104.9	134.0
France	Aubervilliers	8,750	Offices	15.3	19.6
France	Goussainville	20,500	Warehouse and offices	10.6	13.6
France	Aubergenville	27,700	Logistics	9.1	11.6
France	Champs sur Marne	5,930	Offices	8.5	10.8
France	Athis Mons	23,280	Logistics with offices	8.2	10.5
France	Mulhouse	5,250	Offices	7.2	9.2
France	St Cyr L'Ecole	6,340	Offices	7.0	9.0
France	Roissy-en-France	7,800	Offices and warehouse	6.4	8.2
France	Nîmes	3,100	Offices and retail	5.7	7.3
France	Evreux	14,130	Logistics with offices	4.9	6.3
France	Ivry-sur-Seine	7,420	Warehouse and offices	4.1	5.2
France	Fresnes	6,540	Warehouse and offices	3.9	5.0
Spain	Córdoba	16,880	Retail park	12.0	15.4
Spain	Alcalá de Guadaíra	5,700	Shopping centre	2.0	2.5
Spain	Écija	5,950	Shopping centre	2.0	2.5
Spain	Zaragoza	2,590	Warehouse	0.4	0.5
Total		250,180		212.2	271.2

Finance

The Trust's existing borrowing facilities with Barclays Bank PLC ("Barclays") were due to terminate on 10 February 2015 on which date the Board announced that the maturity date of the Trust's borrowings had been extended to 11 May 2015. The Trust was compliant with its borrowing covenants on the test date of 10 February 2015 and no further covenant tests are scheduled before the amended maturity date. A fee of 0.5% (c €1.35m) of the borrowed amount is being charged by Barclays for this extension period and this will be payable at 11 May 2015. The current interest rates will continue to apply to the facilities during the extension period.

This post balance sheet extension of the maturity date provides additional time for the Trust to progress refinancing options including the potential refinancing of assets with third party lenders and potential asset sales.

As at 31 December 2014, the Trust had total borrowings of £211.3 million (€270.0 million) under its facilities with Barclays. As at 31 December 2014, the Trust held cash of £12.4 million.

The key features of the Trust's borrowings are:

· No loan to value ("LTV") covenant test on any of the Trust's properties until maturity.

· 89% of borrowings have interest rates that are fixed to maturity at a weighted average rate of 5.26% per annum.

· 10% of borrowings have interest rates charged at a margin of 10% above three month Euribor.

· 1% of borrowings have interest rates charged at a margin of 2.65% above three month Euribor.

· Interest cover ratio ("ICR") covenant on the senior secured borrowings is set at a minimum of 115% - the Trust is compliant with this covenant as the weighted average ICR over the six months to 31 December 2014 was 137%.

The facility to finance the settlement of the net currency hedge liability is provided in the form of a Euro denominated loan, which including rolled up interest up to 31 December 2014, for a total of €27.6 million; interest is charged quarterly at a margin of 10% above three month Euribor and will be rolled up throughout the term. The Trust is permitted to repay the loan at any time after repayment of the senior secured borrowings (€242.4 million). The hedge loan is secured by a charge over the Trust's Nîmes property and there is a cash-pooling arrangement over the Trust's cash flows from the whole property portfolio to provide further security to the loan but still providing the Trust with working capital for its operations.

Going forward the Trust does not currently propose to hedge its equity for movements in foreign currency. The Trust has a substantial natural hedge through the fact that its borrowings are denominated in the same currency as the majority of its assets.

Market outlook

· Overall leasing activity in the French and Spanish markets has been subdued over the period reflecting economic conditions but despite this backdrop the Trust has achieved lease extensions and new leases on 106,165 square metres (42% of its portfolio) since 1 January 2014.

· Take-up in our principal occupational markets has been adversely affected by the difficult business climate. However, in the Paris region (Ile-de-France), where 84% of the Trust's portfolio is situated, investment confidence is gradually improving.

· Valuation yields have been broadly stable but are vulnerable for properties that have substantial vacancy.

Summary

· The Trust owns a diversified freehold portfolio of properties totalling £212.2 million (€271.2 million) with an average gross valuation yield of 8.3% at the December valuation.

· 86% of the Trust's rental income derives from Grade A tenants with a strong capacity to pay.

· The weighted average lease length within the portfolio is 10.3 years to expiry and 6.7 years to the next break.

· The Board continues to pursue alternative financing options in the run up to the current maturity of the existing bank borrowings in May 2015 and the Trust will continue to seek the support of its lender in an orderly realisation of its investment property. The Trust will provide further updates in due course.

Dick Kingston
Chairman
12 March 2015

Property review

Portfolio overview

Given the current economic environment and the potential maturation of the Group's bank borrowings on 11 May 2015 the Board has decided that to enable repayment of the bank borrowings and protect shareholder value the Trust will continue to seek the support of its lender in an orderly realisation of its investment property while all alternative options continue to be explored. Investors' attention is drawn to the property risk disclosure in note 23.

The Trust owns a portfolio of thirteen properties in France and four properties in Spain totalling approximately 250,180 square metres (approximately 2.7 million square feet) of commercial real estate. The properties are generally well let, well located and offer good value accommodation to occupiers. Of the total property portfolio, 92% is invested in France and 8% in Spain in terms of capital value.

The valuation of the portfolio as at 31 December 2014 was approximately £212.2 million (€271.2 million) based on an average valuation yield of 8.3% with the French portfolio having an average valuation yield of 8.2% and the Spanish portfolio 9.0% respectively. The portfolio as a whole showed a valuation decrease of 3.6% on a Euro like-for-like basis compared to 31 December 2013. This consisted of a decrease of 3.3% in the French portfolio and a decrease of 7.2% in the Spanish portfolio. The average capital value of the portfolio is approximately £848 (€1,084) per square metre (equivalent to £79 per square foot) and the average rental value is approximately £83 (€106) per square metre per annum (equivalent to £7.7 per square foot). Of the overall portfolio, 84% by value is located within the Ile-de-France region around Paris. The portfolio has 70% exposure to the French office and business park sector of which 64% of the total portfolio is in the Ile-de-France region. The reinstatement cost of the portfolio buildings has been assessed at £237 million (€303 million) representing approximately 112% of current value.

As at 31 December 2014, the Trust's portfolio is diversified across business sectors with 70% in offices and business park property, 22% in warehouses and 8% in retail.

The portfolio benefits from strong credit-rated tenants with 86% of its current rent roll secured by leases to Grade A tenants (large international/national companies or public sector). Examples of those categorised as Grade A are given in the Chairman's Statement.

The portfolio has an overall level of average occupancy of 82% measured by rental income as a percentage of potential total income with vacancy representing 18%.

The weighted average lease length within the portfolio is 10.3 years to expiry and 6.7 years to the next break.

Asset management review

The Investment Manager maintains close contact with the Trust's tenants to understand their needs and wherever possible to produce solutions which deliver value to both the tenants and investors. We constantly seek to maintain and, where possible, improve the income from each of the Trust's assets and look for opportunities to create income through value-adding refurbishment, extension and reconfiguration.

Over the period we have continued to concentrate on active asset management and property management initiatives to secure the Trust's income and we are pleased to report a number of important achievements since 1 January 2014 in the following areas:

· extending the lease maturity profile of the property portfolio through lease extensions

· letting of vacant units.

The Investment Manager remains vigilant to ensuring service charges are controlled, the annual level of property costs is closely monitored and additional sources of income are identified.

Since 1 January 2014, new leases and lease extensions totalling approximately 110,470 square metres have been achieved including properties that have been sold subsequently.

Excluding properties that have been sold, these new leases and lease extensions total approximately 106,165 square metres representing 42% of the Trust's current portfolio by area. Of this total, 11,615 square metres were previously detailed in the half year report for 2014 and new leases and lease extensions covering approximately 94,550 square metres have been completed since the half year report was published as detailed below.

FRANCE

Villarceaux-Nozay - A new 12 year lease was signed with the existing tenant, Alcatel-Lucent, with a minimum fixed term of 9 years with effect from 29 August 2014. The new lease represents an increase of almost 5 years in fixed term commitment from the previous lease which had approximately 4 years remaining. The agreement includes a commitment from the Trust of €9 million of staged capital expenditure towards creating both new lettable area and other building improvements at Nozay. The additional lettable space will generate an additional €489,000 of rental income per annum on completion. Nozay contains campus style offices together with business space and ancillary accommodation totalling approximately 82,320 square metres and 3,000 car parking spaces. The Nozay business park is housed on a campus of approximately 36 hectares and is located close to one of Paris' largest business space centres, Courtaboeuf business park. It is also close to Campus Paris-Saclay, a scientific hub of academic establishments including 2 universities, 10 "grandes écoles" and 7 research organizations.

Goussainville - A new 3/6/9 year lease from November 2014 was signed with Design Location, an exhibition stand equipment company, on 1,730 square metres of warehouse and office space. In addition, existing tenants Jacquotte have extended their lease on a 1,850 square metre warehouse unit to January 2018 and Fuji Machinery have signed a new 3/6/9 year lease from December 2014 on their 310 square metres of office accommodation.

Ivry - A new 6/9 year lease from November 2014 was signed with Accedia, an electronics company specialising in CCTV and security, on 520 square metres of vacant office space.

Aubergenville - Existing tenant, Etanco have extended their lease on a 6,400 square metre warehouse unit to April 2016.

Mulhouse - Existing tenant, Alten, have extended their lease on 370 square metres of office accommodation to January 2018.

Goussainville - A new 3/6/9 year lease from January 2015 was signed with Semi-Bah Transport, a logistics company, on 850 square metres of vacant office and warehouse space.

At the Trust's Evreux property, MSL Quadralog's lease terminated in August 2014 on 9,640 square metres of logistics warehouse space. The Trust's Investment Manager is actively involved in the campaign to re-let the property at the earliest opportunity.

SPAIN

Cordoba - VisionLab extended their lease on a 200 square metre retail unit until December 2015.

PROPERTY SALES

The Investment Manager is also focused on asset sales to support the settlement of the bank borrowings as they mature and we are pleased to report the following progress in this regard:

Two property sales were detailed in the half year report, namely the sale of a multi-let warehouse and office investment of 5,180 square metres located at Vitry-sur-Seine for €5.7 million which was 7.5% above its book value and the sale of the larger of the two vacant warehouse units located in Zaragoza, Spain for €1.3 million representing book value.

Following the renegotiation of the lease earlier in 2014, the Trust has sold an office investment located at Gennevilliers for €7.4 million which was in line with its 30 June 2014 valuation. The property totals 3,410 square metres and is located on an established business park 15km north of central Paris and let entirely to Husqvarna France on a 9 year lease with a fixed term of 6 years from April 2014. The purchaser was FRUCTIREGIONS a SCPI managed by NAMI AEW Europe.

Market overview

France

The French economy grew only marginally in 2014 with small increases in the third and fourth quarters. Gross Domestic Product ('GDP') increased by 0.4% for the year. In December 2014, manufacturing output was 0.5% lower year-on-year and the unemployment rate for mainland France in the third quarter of 2014 rose slightly to stand at 9.9%. Linked to the wider economic context, household spending showed signs of increasing towards the end of the year but finished the year with a marginal decrease of 0.2% overall. Inflation has moderated further with the growth rate of the Consumer Prices Index standing at 0.1% per annum at the end of December 2014. The economy is expected to remain generally subdued for the remainder of 2015.

Against this challenging economic background, the property investment market returned to pre-crisis volumes with approximately €22.6 billion invested in commercial real estate in France in 2014 representing a 40% increase compared to 2013. This volume was boosted by a number of large, prime asset transactions being concluded which represented 46% of the total volume. Traditional French investors increased to approximately 60% by volume of the market, with the next largest group being North American investors (14%) followed by Middle Eastern investors (6%). Office investment remained the highest volume sector and accounted for €14.6 billion representing 65% of the total investment in France and an increase of 40% in volume compared to 2013. Logistics and industrial investment totalled €0.9 billion and retail investment reached €6.1 billion.

Of the Trust's total property portfolio, 92% is in France, 84% is in the Ile-de-France and 64% is in Ile-de-France office and business park space.

The Economy of Ile-de-France

Paris and the surrounding region, better known as Ile-de-France, accounts for about a fifth of the French population but contributes nearly one third of French GDP. It is one of the main players in the global economy and is the largest European region by GDP. By population the Ile-de-France metropolis ranks twentieth globally, but ranked by GDP it is the fifth major metropolis in the world after the metropolitan areas of Tokyo, Greater New York, Los Angeles and Osaka.

In Europe, the only city that is comparable economically to Paris is London: taking the wider metropolitan areas these two regions can be considered broadly similar in GDP terms. It should be noted that the GDP of these two metropolitan areas far exceeds those of all other European cities, whether considering the Dutch Randstad, the conurbation Rhine-Ruhr and Rhine-Main, Brussels or Berlin.

With employment of over 5.3 million, Ile-de-France holds a prominent place in the national economy and many national and international companies have their headquarters in the region because of its high quality as a business location. The Ile-de-France has the world's third largest concentration of Fortune 500 head offices.

The Ile-de-France economy remains extremely diverse compared to other cities of its size with a large industrial base and one of the most important agricultural areas in France as well as being a pre-eminent global tourist destination.

Its economy is more diversified than London (with its emphasis on financial markets) or Los Angeles (film and entertainment) and Paris is not overly dependent on any one sector. Even categorizing Ile-de-France as predominantly a services-based economy, its industrial base which accounts for 16% of the region's GDP, remains very important as the region is a major European production centre, which has preserved its competitiveness by increasing its proportion of investment in research and development where it ranks as Europe's number one region for R&D expenditure and personnel. All of these activities are supported by an integrated freight and transport network.

The lack of economic growth at present, combined with the unclear business outlook means that occupiers remain cautious and negotiations with tenants tend to be long and drawn out. In this environment some companies have been reluctant to commit to new premises and many have postponed plans to move, instead opting to renegotiate leases with existing landlords. Nevertheless, after a disappointing third quarter, activity picked up in the last three months of the year bringing annual take-up in 2014 to 2.1 million square metres, an increase of about 13% over 2013 so there are tentative signs of an improvement in the market and this will need to be maintained for this effect to ripple out to more peripheral locations. The average office rent in Ile-de-France has remained broadly stable at €297 per square metre per annum and the office vacancy rate for the Paris region increased slightly to 7.2%. However, on the supply side there is little speculative development due to the difficulty in finding finance and the risks associated with the current market conditions which have made developers cautious of undertaking new schemes without pre-lettings in place.

National take-up in the logistics sector in 2014 reached approximately 2.4 million square metres, which was 13% below the level for 2013 despite the fact that 0.8 million square metres were transacted in the Ile-de-France representing a 46% increase over 2013 and the highest volume since 2011.

Spain

There have been six consecutive quarters of growth in the Spanish economy and this has resulted in an increase in GDP of 2% for 2014. The increase in economic activity combined with the government's efforts to reform the labour market have resulted in a 2% decrease in the unemployment rate from the third quarter of 2013 to the fourth quarter of 2014 when it stood at 23.7%. The near term outlook for the Spanish economy shows continuing signs of gradual improvement.

Rental indexation

On an annual basis, the INSEE Construction Cost Index, applicable to the Trust's leases in France, turned negative for Q2 2014 (-0.98%) but following a small quarter-on-quarter rise the latest published annual indexation base as at Q3 2014 turned positive and stood at 0.93%. The Spanish Consumer Price Index, applicable to the Trust's leases in Spain, was running at an annualised rate of -1.4% as at the end of January 2015.

Paul Cable
For and on behalf of the Investment Manager
12 March 2015

Directors

Dick Kingston (aged 67)

Chairman

Dick Kingston qualified as a Chartered Accountant and was, until December 2006, an executive director of Slough Estates Plc (now SEGRO Plc) ("Slough"), one of the largest London Stock Exchange listed property companies. He was chairman of their continental European real estate activities for his last three years at Slough and Group Finance Director there for nine years up to December 2005. Previously he was Group Financial Controller at Slough for nine years and prior to that was responsible for group financial control at Hawker Siddeley Group.

He was non-executive chairman of listed company Sirius Real Estate Limited and was a non-executive director of Mersey Docks and Harbour Company.

David Rowlinson (aged 52)

Director

David has 30 years' experience in the financial services industry. The majority of David's experience has been gained from working in the fiduciary sector in Guernsey. However, he has also worked in Gibraltar and Switzerland and served in a key role working for an investment management company in Guernsey.

After playing a major part in establishing a large trust company in Guernsey in 1997 which he left in June 2006, David established Liberation Management Limited ("LML") in 2007. David is the Managing Director of LML.

David has been a full member of the Society of Trust and Estate Practitioners since 1994.

David Jeffreys (aged 55)

Director

David Jeffreys qualified as a Chartered Accountant with Deloitte Haskins and Sells in 1985. He works as an independent non-executive director to a number of Guernsey based investment fund companies and managers and is a Guernsey resident.

From 2007 until 2009 David was the Managing Director of EQT Funds Management Limited, the Guernsey management office of the EQT group of private equity funds. He was previously the Managing Director of Abacus Fund Managers (Guernsey) Limited between 1993 and 2004, a third party administration service provider to primarily corporate and fund clients.

In addition to the Company, David is a director of the following listed companies: Alpha Real Trust Limited, PFB Data Centre Fund Limited and Tetragon Financial Group Limited.

Phillip Rose (aged 55)

Director

Phillip Rose is a Fellow of the Securities Institute and holds a Master of Law degree. He has over 30 years' experience in the real estate, funds management and banking industries in Europe, the USA and Australasia. He has been the Head of Real Estate for ABN AMRO Bank, Chief Operating Officer of European shopping centre investor and developer TrizecHahn Europe, Managing Director of retail and commercial property developer and investor Lend Lease Global Investment and Executive Manager of listed fund General Property Trust.

Phillip is currently CEO of Alpha Real Capital LLP and is a member of the Management Committee of the Hermes Property Unit Trust and its Audit Committee.

Serena Tremlett (aged 50)

Director

Serena has over 25 years' experience in financial services, specialising in closed-ended property and private equity funds and fund administration over the last 17 years.

She is a non-executive director on the listed company boards of Alpha Pyrenees Trust, Alpha Real Trust and those of Stenham Property, in addition to various unlisted property and private funds and general partners. Serena was previously company secretary (and a director) of Assura Group, at that time a FTSE 250 company listed on the London Stock Exchange, investing in primary healthcare property and ran Assura's Guernsey head office.

Prior to working for Assura, Serena was head of Guernsey property funds at Mourant International Finance Administration (now State Street) for two years and worked for Guernsey International Fund Managers (now Northern Trust) for seven years where she sat on a number of listed and unlisted fund boards. Since 2008, Serena is co-founder and managing director of Morgan Sharpe Administration, a specialist closed-ended fund administrator.

Directors' and corporate governance report

The Directors present their report and financial statements of the Company and the Group for the year ended 31 December 2014.

Principal activities and status

Since its incorporation on 16 November 2005, the Company, an authorised closed-ended Guernsey registered investment company, has carried on the business of a property investment company, investing in commercial property in France and Spain.

Its shares are listed on the Official List of the UK Listing Authority and have been traded on the London Stock Exchange since 29 November 2005.

Business review, results and dividends

The Chairman's statement above contains a review of the Group's business for the year.

The results for the year are set out in the financial statements.

No dividend was paid during the year under review and the Trust does not currently propose to pay dividends.

Corporate governance

The Company is authorised by the Guernsey Financial Services Commission ('GFSC') and for this reason is required to follow the principles and guidance set out in the Finance Sector Code of Corporate Governance issued by the GFSC and effective from 1 January 2012 ('Guernsey Code').

As a Guernsey registered company, the Company is not required to comply with the UK Corporate Governance Code ('UK Code'). However, the Directors do take into consideration the UK Code in determining its governance procedures whilst also taking into account the size of the Company, the nature of its business and its entirely non-executive board.

The Board

Biographies of the Directors are set out above.

The Directors' interests in shares of the Company as at 31 December 2014 are set out below and there have been no changes in such interests up to the current date:

	Number of ordinary shares 2014	Number of ordinary shares 2013
Dick Kingston	710,616	710,616
David Jeffreys	250,000	250,000
Phillip Rose	1,290,079	1,290,079
David Rowlinson	-	-
Serena Tremlett	121,472	121,472

Non-executive Directors are not appointed for specified terms. However, appointments of Board members can be terminated at any time without penalty and the Company's Articles of Association ("Articles") require each Director to retire and submit himself/herself to re-election by the shareholders at every third year. In addition, the Board believes that continuity and experience adds to its strength.

The Annual General Meeting of the Company will take place on 24 April 2015. At this meeting, Phillip Rose and David Jeffreys will retire and submit themselves for re-election. The remainder of the Board recommend their re-appointment. Phillip Rose is a member of the Investment Manager and, under the terms of the Company's Prospectus dated 23 November 2005, submits himself for annual re-election.

Individual Directors may seek independent legal advice in relation to their duties on behalf of the Company.

Senior Independent Director

The Board has appointed David Jeffreys as its Senior Independent Director and has agreed that he will be available for discussions with shareholders independently of his peers, to the extent appropriate.

Operations of the Board

The Board's primary role is to review matters which are of strategic importance to the Company, including the following:

1) Setting, and continuing to review, the objectives and strategy of the Company, taking into account market conditions.

2) Reviewing the capital structure of the Company including gearing.

3) Appointing the Investment Manager, administrator and other appropriately skilled service providers; monitoring their effectiveness and performance through regular reports and meetings.

4) Reviewing the Company's performance including net asset value, earnings per share and payment of dividends.

The Board considers these matters at its quarterly meetings.

The Board meets at least four times per annum and on an ad-hoc basis to consider specific issues reserved for decision by the Board including all potential acquisitions and disposals, significant capital expenditure and leasing matters and decisions relating to the Company's financial gearing.

Certain matters relating to the implementation of strategy are delegated either to the Investment Manager or the administrator but the performance of such delegation by these independent agents is regularly monitored by the Board.

At the Board's quarterly meetings it considers papers circulated in advance including reports provided by the Investment Manager and the administrator in its capacity as Company Secretary. The Investment Manager's report comments on:

· The French and Spanish property markets including recommendations for any changes in strategy that the Investment Manager considers may be appropriate.

· Performance of the Group's portfolio and key asset management initiatives.

· Transactional activity undertaken over the previous quarter and being contemplated for the future.

· The Group's financial position including relationships with bankers and lenders.

The administrator provides a quarterly compliance, company secretarial and regulatory report.

Together, these reports enable the Board to assess the success with which the Group's strategy is being implemented, consider any relevant risks (such as the general economic climate) and to consider how they should be properly managed.

Board and Director appraisals

The Board carries out an annual review of its composition and performance (including the performance of individual Directors) and that of its standing committees. Such appraisal includes reviewing the performance and composition of the Board (and whether it has an appropriate mix of knowledge, skills and experience), the relationships between the Board and the Investment Manager and administrator, the processes in place and the information provided to the Board and communication between Board members.

Board meeting attendance

The table below shows the attendance at Board meetings during the year to 31 December 2014:

Director	No of meetings attended	No of meetings eligible to attend
Dick Kingston	12	15
David Jeffreys	15	15
Phillip Rose	4	15
David Rowlinson	11	15
Serena Tremlett	12	15

Directors' and officers' insurance

An appropriate level of Directors' and Officers' insurance is maintained whereby Directors are indemnified against liabilities to third parties to the extent permitted by Guernsey company law.

Board Committees

The Board has established three standing committees, all of which operate under detailed terms of reference, copies of which are available on request from the Company Secretary.

Audit Committee

The Audit Committee consists of David Jeffreys (Chairman), Dick Kingston, David Rowlinson and Serena Tremlett. The Board is satisfied that David Jeffreys continues to have the requisite recent and relevant financial experience to fulfil his role as Chairman of the Audit Committee.

Role of the Committee

The role of the Audit Committee, which meets at least twice a year, includes:

· The engagement, review of the work carried out by and the performance of the Company's external auditor.

· To monitor and review the independence, objectivity and effectiveness of the external auditor.

· To develop and apply a policy for the engagement of the external audit firm to provide non-audit services.

· To assist the Board in discharging its duty to ensure that financial statements comply with all legal requirements.

· To review the Company's financial reporting and internal control policies and to ensure that the procedures for the identification, assessment and reporting of risks are adequate.

· To review regularly the need for an internal audit function.

· To monitor the integrity of the Company's financial statements, including its annual and half year reports and announcements relating to its financial performance, reviewing the significant financial reporting issues and judgements which they contain.

· To review the consistency of accounting policies and practices.

· To review and challenge where necessary the financial results of the Company before submission to the Board.

The Audit Committee makes recommendations to the Board which are within its terms of reference and considers any other matters as the Board may from time to time refer to it.

Committee meeting attendance

Director	No of meetings attended	No of meetings eligible to attend
David Jeffreys	4	4
Dick Kingston	4	4
David Rowlinson	4	4
Serena Tremlett	4	4

Policy for non audit services

The Committee has adopted a policy for the provision of non-audit services by its external auditor, BDO Limited and reviews and approves all material non-audit related services in accordance with the need to ensure the independence and objectivity of the external auditor. No services, other than audit-related ones, were carried out by BDO Limited during 2014.

Internal audit

The Board relies upon the systems and procedures employed by the Investment Manager and the administrator which are regularly reviewed and are considered to be sufficient to provide it with the required degree of comfort. Resulting from this and the fact that the Group only has one employee, the Board continues to believe that there is no need for an internal audit function, although the Audit Committee considers this annually, reporting its findings to the Board.

Nomination Committee

The Nomination Committee consists of Serena Tremlett (Chairman), David Jeffreys, Dick Kingston, Phillip Rose and David Rowlinson.

The Committee's principal task is to review the structure, size and composition of the Board in relation to its size and position in the market and to make recommendations to fill Board vacancies as they arise and it meets at least annually.

Committee meeting attendance

Director	No of meetings attended	No of meetings eligible to attend
Serena Tremlett	1	1
David Jeffreys	1	1
Dick Kingston	1	1
Phillip Rose	1	1
David Rowlinson	-	1

Remuneration Committee and attendance

The Remuneration Committee consists of the independent non-executive Directors being David Jeffreys (Chairman), Dick Kingston, David Rowlinson and Serena Tremlett.

The Board has approved formal terms of reference for the Committee and a copy of these is available on request from the Company Secretary.

As the Company comprises only non-executive directors, the Committee's main role is to determine their remuneration within the cap set out in the Company's Articles. The Remuneration Committee met once during 2014.

Remuneration report

The aggregate fees payable to the Directors are limited to £200,000 per annum under the Company's Articles and the annual fees payable to each Director have not changed since the Company's shares were listed in 2005. The fees payable to the Directors are expected to reflect their expertise, responsibilities and time spent on the business of the Company, taking into account market equivalents, the activities and the size of the Company and market conditions. Under their respective appointment letters, each director is entitled to an annual fee together with a provision for reimbursement for any reasonable out of pocket expenses.

During the year the Directors received the following emoluments in the form of fees from the Company:

	Year ending 31 December 2014 £	Year ending 31 December 2013 £
Dick Kingston	30,000	30,000
David Jeffreys	23,000	23,000
Phillip Rose	20,000	20,000
David Rowlinson	20,000	20,000
Serena Tremlett	20,000	20,000
Total	113,000	113,000

Internal control and risk management

The Board understands its responsibility for ensuring that there are sufficient, appropriate and effective systems, procedures, policies and processes for internal control of financial, operational, compliance and risk management matters in place in order to manage the risks which are an inherent part of business. Such risks are managed rather than eliminated in order to permit the Company to meet its financial and other objectives.

As the Company has only one employee, the Board reviews the internal procedures of both its Investment Manager and its administrator upon which it is reliant. The Investment Manager has a schedule of matters which have been delegated to it by the Board and upon which it reports to the Board on a quarterly basis. These matters include quarterly management accounts and reporting both against key financial performance indicators and its peer group. Further, a compliance report is produced by the administrator for the Board on a quarterly basis.

The Company maintains a risk management framework which considers the non-financial as well as financial risks and this is reviewed by the Audit Committee prior to submission to the Board.

Investment management agreement

The Company has an agreement with the Investment Manager. This sets out the Investment Manager's key responsibilities, which include proposing a property investment strategy to the Board, identifying property investments to recommend for acquisition or sale and arranging appropriate lending facilities. The Investment Manager is also responsible to the Board for all issues relating to property asset management.

Substantial shareholding

Shareholders with holdings of more than three per cent of the issued ordinary shares of the Company as at 20 February 2015 were as follows:

Name of investor	No. of ordinary shares	% held
Antler Investment Holdings Limited	21,437,393	18.22
Alpha Real Capital LLP	9,390,800	7.98
Hargreaves Lansdown Asset Management	7,533,965	6.41
TD Direct Investing	6,349,305	5.40
Mr Richard M. Peskin	6,000,000	5.10
Mrs Rosemary J. Skelley	5,857,607	4.98
Barclays Wealth Management (UK)	5,825,599	4.95
Halifax Share Dealing	3,819,196	3.25

Shareholder relations

The Board places high importance on its relationship with its shareholders, with members of the Investment Manager's Investment Committee making themselves available for meetings with key shareholders and sector analysts. Reporting of these meetings and market commentary is received by the Board on a quarterly basis to ensure that shareholder communication fulfils the needs of being useful, timely and effective. One or more members of the Board and the Investment Manager will be available at the Annual General Meeting to answer any questions that shareholders attending may wish to raise.

Directors' Responsibilities Statement

Company law requires the Directors to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the Company and of the Group at the end of the year and of the profit or loss of the Company and the Group for that year.

In preparing those financial statements, the Directors are required to:

(1) select suitable accounting policies and then apply them consistently;

(2) make judgements and estimates that are reasonable and prudent;

(3) state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

(4) prepare the financial statements on the going concern basis unless it is appropriate to assume that the Company and Group will not continue in business.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and of the Group and to enable them to ensure that the financial statements comply with the Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of the Company and Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors confirm that they have complied with the above requirements in preparing the financial statements.

So far as each of the Directors are aware, there is no relevant information of which the Company's auditor is unaware, and they have taken all the steps they ought to have taken as Directors to make themselves aware of any relevant information and to establish that the Company's auditor is aware of that information.

Going concern

Annual General Meeting

The AGM will be held in Guernsey at 9 a.m. on 24 April 2015 at Old Bank Chambers, La Grande Rue, St Martin's, Guernsey. The meeting will be held to receive the Annual Report and Financial Statements, re-elect Directors and propose the reappointment of the auditor and that the Directors be authorised to determine the auditor's remuneration.

Auditor

BDO Limited has expressed its willingness to continue in office as auditor of the Company.

By order of the Board,

David Jeffreys Serena Tremlett

Director Director

Directors' statement pursuant to the Disclosure and Transparency Rules

Each of the Directors, whose names and functions are listed in the Directors Report confirm that, to the best of each person's knowledge and belief:

· The financial statements, prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and Company, and

· The Chairman's Statement and the Property Review includes a fair review of the development and performance of the business and the position of the Company and Group and notes 22 and 23 to the financial statements provide a description of the principal risks and uncertainties that they face.

By order of the Board,

David Jeffreys Serena Tremlett

Director Director

Corporate responsibility - benefits, risks and controls

The Board has reviewed the Company's Corporate Responsibility Policy and considers this to be appropriate for the Company. The Company's policy is as follows:

Alpha Pyrenees Trust Limited is committed to delivering sustainable investment returns in a way that delivers positive environmental, social and economic benefits. The Company recognises that the way in which buildings are designed, built, managed and occupied, significantly influences their impact on the environment and affected communities and it seeks to manage these issues.

The Company believes that, through the implementation of socially responsible policies, the Company can manage effectively our sustainability related risks, associated with, for example, climate change (more severe and regular floods, increasing storm damage costs and rising energy prices), site contamination and remediation, use of hazardous materials, waste management (rising landfill and disposal costs) and local community relations.

The Company's standard business process ensures that appropriate environmental reports are obtained as part of the due diligence process for property acquisitions and the Company assesses the accessibility of each property acquisition to public transportation.

The Company's managers and appointed agents are required to comply with all relevant laws and regulations affecting the Company's business, and managers are expected to be aware of the environmental issues associated with property investment including environmental health and safety legislation, energy use, pollution and waste management.

Independent auditors' report

To the members of Alpha Pyrenees Trust Limited

We have audited the financial statements of Alpha Pyrenees Trust Limited for the year ended 31 December 2014 which comprise the consolidated and company statements of comprehensive income, the consolidated and company balance sheets, the consolidated and company cash flow statements, the consolidated and company statements of changes in equity and the related notes 1 to 23. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the company's members, as a body, in accordance with Section 262 of the Companies (Guernsey) Law, 2008. Our audit work is undertaken so that we might state to the parent company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the parent company and the parent company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the directors and auditor

As explained more fully in the Directors' Responsibilities Statement within the Directors' Report, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council's Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group's and parent company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non‑financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent misstatements or inconsistencies we consider the implications for our report.

Opinion on the financial statements

In our opinion the financial statements:

· give a true and fair view of the state of the group's and of the parent company's affairs as at 31 December 2014 and of the group's loss and the parent company's loss for the year then ended;

· have been properly prepared in accordance with IFRSs as adopted by the European Union; and

· have been properly prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.

Emphasis of matter ‑ going concern and bank facilities

In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosures made in notes 2 and 17 to the financial statements which explain that the financial statements have not been prepared on a going concern basis. As it is the intention of the Board to effect an orderly disposal of the Group's investment property, seeking the continued support of its lender whilst doing so, the financial statements have not been prepared on a going concern basis. The directors do not consider that any adjustments would be required as a result of this basis of preparation on the expectation of an orderly disposal of the group's investment properties.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:

· proper accounting records have not been kept by the parent company; or

· the financial statements are not in agreement with the accounting records; or

· we have failed to obtain all the information and explanations, which, to the best of our knowledge and belief, are necessary for the purposes of our audit.

.......................................................

Richard Michael Searle FCA

For and on behalf of BDO Limited

Chartered Accountants and Recognised Auditor

Place du Pré

Rue du Pré

St Peter Port

Guernsey

Date: 12 March 2015

Consolidated statement of comprehensive income

		For the year ended 31 December 2014			For the year ended 31 December 2013
	Notes	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000

Income
Revenue	3	19,398	-	19,398	22,699	-	22,699
Property operating expenses		(6,148)	-	(6,148)	(6,502)	-	(6,502)
Net rental income		13,250	-	13,250	16,197	-	16,197

Loss on disposal of investment properties		-	(1,400)	(1,400)	-	-	-

Expenses
Losses on revaluation of investment properties	12, 13	-	(12,416)	(12,416)	-	(6,934)	(6,934)
Investment Manager's fee		(1,646)	(706)	(2,352)	(1,933)	(828)	(2,761)
Other administration costs	5	(1,395)	-	(1,395)	(1,229)	-	(1,229)

Operating profit/(loss)		10,209	(14,522)	(4,313)	13,035	(7,762)	5,273

Finance income	4	4	7,550	7,554	23	8,778	8,801
Finance costs	6	(14,051)	(206)	(14,257)	(12,933)	(5,444)	(18,377)

(Loss)/profit before taxation		(3,838)	(7,178)	(11,016)	125	(4,428)	(4,303)

Taxation	7	-	(547)	(547)	-	(1,273)	(1,273)

(Loss)/profit for the year		(3,838)	(7,725)	(11,563)	125	(5,701)	(5,576)

Other comprehensive income/(expense)
Items that may be reclassified to profit or loss in subsequent periods:
Foreign exchange (losses)/gains on translation of foreign operations (translation reserve)		-	(456)	(456)	-	680	680

Other comprehensive (expense)/income for the year		-	(456)	(456)	-	680	680

Total comprehensive (expense)/income for the year		(3,838)	(8,181)	(12,019)	125	(5,021)	(4,896)

Loss per share - basic & diluted	9			(9.8)p			(4.7)p

Adjusted (losses)/earnings per share - basic & diluted	9			(3.3)p			0.1p

The total column of this statement represents the Group's statement of comprehensive income, prepared in accordance with IFRS. The revenue and capital columns are supplied as supplementary information permitted under IFRS. All items in the above statement derive from continuing operations. All income is attributable to the equity holders of the parent company. There are no non-controlling interests.

The accompanying notes are an integral part of the financial statements.

Consolidated balance sheet

As at 31 December 2014	Notes	2014 £'000	2013 £'000

Non-current assets
Investment properties	12	89,543	236,920
		89,543	236,920
Current assets
Investment properties held for sale	13	122,637	11,194
Trade and other receivables	14	6,100	4,244
Cash and cash equivalents	15	12,425	5,923
		141,162	21,361
Total assets		230,705	258,281

Current liabilities
Trade and other payables	16	(6,032)	(2,810)
Financial liabilities at fair value through profit or loss	23	(948)	-
Bank borrowings	17	(212,858)	(1,707)
Rent deposits		(730)	(1,057)
		(220,568)	(5,574)

Total assets less current liabilities		10,137	252,707

Non-current liabilities
Financial liabilities at fair value through profit or loss	23	-	(8,825)
Bank borrowings	17	-	(221,745)
Rent deposits		(952)	(1,094)
Deferred taxation	7	(6,230)	(6,069)
		(7,182)	(237,733)
Total liabilities		(227,750)	(243,307)

Net assets		2,955	14,974

Equity
Share capital	18	-	-
Special reserve	19	113,131	113,131
Translation reserve	19	22,272	22,728
Capital reserve	19	(129,871)	(122,146)
Revenue reserve	19	(2,577)	1,261

Total equity		2,955	14,974

Net asset value per share	10	2.5p	12.7p
Net asset value per share (adjusted)	10	6.0p	22.8p

The financial statements were approved by the Board of Directors and authorised for issue on 12 March 2015. They were signed on its behalf by:

David Jeffreys Serena Tremlett

Director Director

The accompanying notes are an integral part of the financial statements.

Consolidated cash flow statement

	Notes	For the year ended 31 December 2014 £'000	For the year ended 31 December 2013 £'000

Operating activities
Loss for the year		(11,563)	(5,576)

Adjustments for :
Loss on disposal of investment properties		1,400	-
Losses on revaluation of investment properties		12,416	6,934
Deferred taxation		547	1,273
Finance income		(7,554)	(8,801)
Finance costs		14,257	18,377

Operating cash flows before movements in working capital		9,503	12,207

Movements in working capital:
(Increase)/decrease in operating trade and other receivables		(2,571)	176
Increase /(decrease) in operating trade and other payables		3,158	(192)

Cash generated from operations		10,090	12,191

Interest received		4	18
Currency swap interest paid		-	(787)

Cash flows from operating activities		10,094	11,422

Investing activities
Proceeds from disposal of investment properties		11,560	-
Capital expenditure		(244)	(945)
Transfer to cash pooling account	15	(7,766)	-
Tenant contribution		(3,719)	-

Cash flows used in investing activities		(169)	(945)

Financing activities
Currency swap collateral received		-	8,530
Loan advanced net of arrangement costs		-	20,354
Currency swap settlement		-	(29,525)
Repayment of borrowings		-	(250)
Bank loan interest paid and costs		(10,607)	(11,204)
Dividends paid		-	(706)

Cash flows used in financing activities		(10,607)	(12,801)

Net decrease in cash and cash equivalents		(682)	(2,324)

Cash and cash equivalents at beginning of year		5,923	8,400
Exchange translation movement		(582)	(153)

Cash and cash equivalents at end of year (note 15)		4,659	5,923

The accompanying notes are an integral part of the financial statements.

Consolidated statement of changes in equity

For the year ended 31 December 2013	Share capital £'000	Special reserve £'000	Translation reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total equity £'000

At 1 January 2013	-	113,131	22,048	(116,445)	1,842	20,576

Total comprehensive income/(expense) for the year
(Loss)/profit for the year	-	-	-	(5,701)	125	(5,576)
Other comprehensive income	-	-	680	-	-	-
Total comprehensive income/(expense) for the year	-	-	680	(5,701)	125	(4,896)

Transactions with owners
Dividends	-	-	-	-	(706)	(706)
Total transactions with owners	-	-	-	-	(706)	(706)

At 31 December 2013	-	113,131	22,728	(122,146)	1,261	14,974

Note 18, 19

For the year ended 31 December 2014	Share capital £'000	Special reserve £'000	Translation reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total equity £'000

At 1 January 2014	-	113,131	22,728	(122,146)	1,261	14,974

Total comprehensive income/(expense) for the year
Loss for the year	-	-	-	(7,725)	(3,838)	(11,563)
Other comprehensive expense	-	-	(456)	-	-	(456)
Total comprehensive expense for the year	-	-	(456)	(7,725)	(3,838)	(12,019)

Transactions with owners
Dividends	-	-	-	-	-	-
Total transactions with owners	-	-	-	-	-	-

At 31 December 2014	-	113,131	22,272	(129,871)	(2,577)	2,955

Note 18, 19

The accompanying notes are an integral part of the financial statements.

Company statement of comprehensive income

	Notes	For the year ended 31 December 2014			For the year ended 31 December 2013
	Notes	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000

Income
Revenue	3	7,466	-	7,466	8,515	-	8,515
Total income		7,466	-	7,466	8,515	-	8,515

Expenses
Investment Manager's fee		(491)	(210)	(701)	(661)	(283)	(944)
Other administration costs	5	(504)	-	(504)	(422)	-	(422)
Total expenses		(995)	(210)	(1,205)	(1,083)	(283)	(1,366)

Operating profit/(loss)		6,471	(210)	6,261	7,432	(283)	7,149

Finance income	4	3	-	3	17	2,504	2,521
Finance costs	6	(1)	(1,084)	(1,085)	(2)	-	(2)
Movement in impairment of amounts receivable from subsidiary undertakings	22	-	(17,198)	(17,198)	-	(14,564)	(14,564)

Profit/(loss) before taxation		6,473	(18,492)	(12,019)	7,447	(12,343)	(4,896)

Taxation	7	-	-	-	-	-	-

Profit/(loss) for the year		6,473	(18,492)	(12,019)	7,447	(12,343)	(4,896)

Total comprehensive income/(expense) for the year		6,473	(18,492)	(12,019)	7,447	(12,343)	(4,896)

The total column of this statement represents the Company's statement of comprehensive income, prepared in accordance with IFRS. The revenue and capital columns are supplied as supplementary information permitted under IFRS. All items in the above statement derive from continuing operations.

The accompanying notes are an integral part of the financial statements.

Company balance sheet

As at 31 December 2014	Notes	2014 £'000	2013 £'000

Non-current assets
Investments in subsidiary undertakings	11	151	141
Amounts receivable from subsidiary undertakings	11	15	8,023
		166	8,164

Current assets
Trade and other receivables	14	5	6
Amounts receivable from subsidiary undertakings	11	1,364	3,574
Cash and cash equivalents		1,801	3,565
		3,170	7,145

Total assets		3,336	15,309

Current liabilities
Trade and other payables	16	(381)	(335)

Total liabilities		(381)	(335)

Net assets		2,955	14,974

Equity
Share capital	18	-	-
Special reserve	19	113,131	113,131
Capital reserve	19	(136,774)	(118,282)
Revenue reserve	19	26,598	20,125

Total equity		2, 955	14,974

The financial statements were approved by the Board of Directors and authorised for issue on 12 March 2015. They were signed on its behalf by:

David Jeffreys Serena Tremlett

Director Director

The accompanying notes are an integral part of the financial statements.

Company cash flow statement

	For the year ended 31 December 2014 £'000	For the year ended 31 December 2013 £'000

Cash flows from operating activities

Loss for the year	(12,019)	(4,896)

Adjustments for :
Finance costs	1,085	2
Finance income	(3)	(2,521)
Interest from subsidiary undertakings	(7,466)	(8,515)
Movement in impairment of amounts receivable from subsidiary undertakings	17,198	14,564

Operating cash flows before movements in working capital	(1,205)	(1,366)

Decrease in operating trade and other receivables	1	12
Increase in operating trade and other payables	46	39

Cash flows used in operations	(1,158)	(1,315)

Interest paid	(1)	(2)
Interest received	3	17
Interest received from subsidiaries	40	352
Taxation	-	-

Cash flows used in operating activities	(1,116)	(948)

Investing activities
Loans advanced	(468)	(778)

Cash flows used in investing activities	(468)	(778)

Financing activities
Dividend payments	-	(706)

Cash flows used in financing activities	-	(706)

Net decrease in cash and cash equivalents	(1,584)	(2,432)

Cash and cash equivalents at beginning of year	3,565	6,128
Exchange translation movement	(180)	(131)

Cash and cash equivalents at end of year	1,801	3,565

The accompanying notes are an integral part of the financial statements.

Company statement of changes in equity

For the year ended 31 December 2013	Share capital £'000	Special reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total equity £'000

At 1 January 2013	-	113,131	(105,939)	13,384	20,576

Total comprehensive income/(expense) for the year
(Loss)/profit for the year	-	-	(12,343)	7,447	(4,896)
Other comprehensive income	-	-	-	-	-
Total comprehensive (expense)/income for the year	-	-	(12,343)	7,447	(4,896)

Transactions with owners
Dividends	-	-	-	(706)	(706)
Total transactions with owners	-	-	-	(706)	(706)

At 31 December 2013	-	113,131	(118,282)	20,125	14,974

Note 18, 19

For the year ended 31 December 2014	Share capital £'000	Special reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total equity £'000

At 1 January 2014	-	113,131	(118,282)	20,125	14,974

Total comprehensive income/(expense) for the year
(Loss)/profit for the year	-	-	(18,492)	6,473	(12,019)
Other comprehensive income	-	-	-	-	-
Total comprehensive (expense)/income for the year	-	-	(18,492)	6,473	(12,019)

Transactions with owners
Dividends	-	-	-	-	-
Total transactions with owners	-	-	-	-	-

At 31 December 2014	-	113,131	(136,774)	26,598	2,955

Note 18, 19

The accompanying notes are an integral part of the financial statements.

Notes to the financial statements

For the year ended 31 December 2014

1. General information

The Company is a limited liability, closed-ended investment company incorporated in Guernsey. The address of the registered office is given below. The nature of the Group's operations and its principal activities are set out in the Chairman's statement above. The financial statements were approved and authorised for issue on 12 March 2015 and signed by David Jeffreys and Serena Tremlett on behalf of the Board.

2. Significant accounting policies

A summary of the principal accounting policies is set out below. The policies have been consistently applied to all years presented.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the accounting policies. The areas involving a high degree of judgement or complexity or areas where the assumptions and estimates are significant to the financial statements are disclosed in this note.

Basis of preparation

These financial statements have been prepared in accordance with IFRS, which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), and International Accounting Standards and Standards Interpretations Committee's interpretations approved by the International Accounting Standards Committee ("IASC") that remain in effect, and to the extent that they have been adopted by the European Union.

Going concern

a) Adoption of new and revised Standards

A number of standards and interpretations issued by the IASB and the International Financial Reporting Interpretations Committee are effective for the current year. The adoption of these standards has not led to any changes in the Group's accounting policies.

b) Standards and Interpretations in issue and not yet effective

At the date of authorisation of these financial statements, the following standards and interpretations, which have not been applied in these financial statements, were in issue but not yet effective and are relevant to the financial statements of the Company and Group:

IFRS 9: Financial Instruments - for accounting periods commencing on or after 1 January 2018*

IFRS 15: Revenue from Contracts with Customers - for accounting periods commencing on or after 1 January 2017*

Revised and amended Standards

IFRS 7: Financial Instruments: Disclosures- Amendments requiring disclosures about the initial application of IFRS 9 - for accounting periods commencing on or after1 January 2018*

IFRS 10: Consolidated Financial Statements - amended for sale or contribution of assets between an investor and its associate or joint venture - for accounting periods commencing on or after 1 January 2016*

IFRS 11: Joint Arrangements - amended by accounting for acquisitions of interest in joint operations - for accounting periods commencing on or after 1 January 2016*

IAS 27: Separate Financial Statements - amended by equity method in separate financial statements - for accounting periods commencing on or after 1 January 2016*

IAS 28: Investments in Associates and Joint Ventures - amended for sale or contribution of assets between an investor and its associate or joint venture - for accounting periods commencing on or after 1 January 2016*

*Still to be endorsed by the EU

In December 2013, the IASB issued further improvements to IFRS, which have become effective for accounting periods commencing on or after 1 July 2014. These cover amendments to nine standards.

In September 2014, the IASB issued further improvements to IFRS, which will become effective for accounting periods commencing on or after 1 January 2016 (still to receive endorsement by the EU). These cover amendments to five standards.

The Directors anticipate that, with the exception of IFRS 9, the adoption of these standards and interpretations in future periods will not have a material impact on the financial statements of the Company or the Group.

IFRS 9 uses a single approach to determine whether a financial asset is measured at amortised cost or at fair value, replacing the many different rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments (its business model) and the contractual cash flow characteristics of the financial assets (payments that are solely payments of principal and interest). The recognition and de-recognition requirements for financial assets and financial liabilities are unchanged from those set out in IAS 39.

The classification and measurement requirements of financial liabilities are broadly similar to IAS 39 although the requirements relating to financial liabilities measured at fair value have been amended so that changes in fair value related to an entity's own credit risk are generally recognised directly in other comprehensive income. IFRS 9 requires one impairment method which would replace the various different methods indicated by IAS 39 that arise from the different categories' classification. At the time of adoption of the new standard it is expected only that the Company and Group's financial assets will be required to be classified in accordance with the new standard and no changes in measurement will be required.

The principal accounting policies adopted are set out below.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and the subsidiary undertakings controlled by the Company, made up to 31 December each year. Control is achieved where the Company has power over the investee, exposure or rights, to variable returns from its involvement with the investee and the ability to use its power to affect the amount of the investor's returns.

The results of subsidiary undertakings acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal as appropriate.

When necessary, adjustments are made to the financial statements of subsidiary undertakings to bring their accounting policies used into line with those used by the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Presentation of income statement

In order to better reflect the activities of an investment company and in accordance with guidance issued by the Association of Investment Companies ("AIC"), supplementary information, which analyses the income statement between items of a revenue and capital nature, has been presented alongside the statement of comprehensive income.

Revenue recognition

Rental income from investment property leased out under an operating lease is recognised in the statement of comprehensive income on a straight line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the net consideration for the use of the property and are therefore also recognised on the same straight line basis. Rental revenues are accounted for on an accruals basis. Therefore, deferred revenue generally represents advance payments from tenants. Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the Group and the amount of revenue can be measured reliably. Upon early termination of a lease by the lessee, the receipt of a surrender premium is immediately recognised as revenue.

The Company's interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable. Provisions against recoverability of interest income are recognised as an expense within the movement in impairment of amounts receivable from subsidiary undertakings.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Foreign currencies

a) Functional and presentation currency

Items included in the financial statements of each of the Group entities are measured in the currency of the primary economic environment in which the entity operates (the "functional currency"). The consolidated financial statements are presented in Sterling, which is the Company's functional and presentation currency.

b) Transactions and balances

Transactions in currencies other than Sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Gains and losses arising on retranslation are included in net profit or loss for the year.

c) Group companies

The results and financial position of all the Group entities that have a functional currency which differs from the presentation currency are translated into the presentation currency as follows:

(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet;

(ii) income and expenses for each statement of comprehensive income are translated at the average exchange rate prevailing in the period; and

(iii) all resulting exchange differences are recognised as a separate component of equity.

On consolidation, the exchange differences arising from the translation of the Company's net investment in foreign entities are taken to other comprehensive income. When a foreign operation is sold, such exchange differences are recognised in the statement of comprehensive income as part of the gain or loss on sale.

The year-end exchange rate used is £1:€1.278 (2013: £1:€ 1.198) and the average rate for the year used is £1:€1.240 (2013: £1:€1.178).

Operating profit

a) Company

Operating profit includes interest income from subsidiary entities, as reduced by administrative expenses and excludes the movement on impairment of loans from subsidiaries, finance costs and finance income.

b) Group

Operating profit includes net gains or losses on revaluation of investment properties, as reduced by administrative expenses and property operating costs and excludes finance costs and finance income.

Expenses

All expenses are accounted for on an accruals basis and include fees and other expenses paid to the administrator, the Investment Manager and the Directors.

In respect of the analysis between revenue and capital items presented within the statement of comprehensive income, all expenses have been presented as revenue items except that:

(i) expenses which are incidental to the acquisition of an investment property are included within the cost of that property.

(ii) a proportion of the Investment Manager's fee is charged to the capital column in the statement of comprehensive income in order to reflect the Directors' estimated long-term view of the nature of the investment return of the Group.

(iii) realised gains or losses from disposal of investment properties and unrealised gains or losses on revaluation of investment properties;

(iv) foreign exchange losses.

Taxation

The Company is exempt from Guernsey taxation on income derived outside of Guernsey and bank interest earned in Guernsey. A fixed annual fee of £600 is payable to the States of Guernsey in respect of this exemption. No charge to Guernsey taxation arises on capital gains. The Group is liable to foreign tax arising on activities of the overseas subsidiaries. The Company has subsidiary operations in Luxembourg, Belgium, France and Spain.

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantially enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible timing differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset realised. Deferred tax is charged or credited in the statement of comprehensive income.

Dividends

Dividends are recognised as a liability in the financial statements in the period in which they become obligations of the Company.

Fair value measurement

The Group measures certain financial instruments such as derivatives, and non-financial assets such as investment property, at fair value at the end of each reporting period, using recognised valuation techniques and following the principles of IFRS 13. In addition, fair values of financial instruments measured at amortised cost are disclosed in the financial statements.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

· in the principal market for the asset or liability

· in the absence of a principal market, in the most advantageous market for the asset or liability.

The Group must be able to access the principal or the most advantageous market at the measurement date. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs significant to the fair value measurement as a whole:

· Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

· Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

· Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

Investment property

Investment property, which is property held to earn rentals and/or for capital appreciation, is initially recognised at cost being the fair value of consideration given including related transaction costs. After initial recognition at cost, investment properties are carried at their fair values based on half yearly professional valuations made by Knight Frank LLP. The valuations are in accordance with standards complying with the Royal Institution of Chartered Surveyors Appraisal and Valuation manual and the International Valuation Standards Committee.

Gains or losses arising from changes in the fair value of investment property are included in the statement of comprehensive income in the period in which they arise. Properties are treated as acquired when the Group assumes the significant risks and returns of ownership and as disposed of when these are transferred to the buyer.

Investment property held for sale

Investment properties are classified as held for sale if their carrying amount will be recovered by sale rather than by continuing use in the business. For this to be the case, the property must be available for immediate sale in its present condition, management must be committed to and have initiated a plan to sell the property which, when initiated, was expected to result in a completed sale within twelve months. Property assets that are classified as held for sale are measured at fair value in accordance with IAS 40 Investment Property.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, which is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of the Company.

For management purposes, the Group is organised into one main operating segment, which invests in commercial property located in Europe. All of the Group's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based upon analysis of the Group as one segment. The financial results from this segment are equivalent to the financial statements of the Group as a whole.

All of the Group's revenue is from entities that are incorporated in Europe.

All of the Group's non-current assets are located in Europe: France and Spain. Total non-current assets located in France amounted to £85.1 million (2013: £217.0 million) and non-current assets located in Spain amounted to £4.4 million (2013: £19.9 million).

With the exception of cash and cash equivalents, which are located in Europe and Guernsey, all of the Group's current assets are located in Europe only.

Revenue from one tenant, Alcatel-Lucent, amounted to £9.1 million in 2014 (2013: £9.6 million). Total revenue from tenants located in France amounted to £17.9 million (2013: £21.0 million) and revenue from tenants located in Spain amounted to £1.5 million (2013: £1.7 million). Please refer to note 22 for further details.

Investment in subsidiaries

Investments in subsidiaries are initially recognised and subsequently carried at cost in the Company's financial statements less, where appropriate, provisions for impairment.

Financial instruments

Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. The Group shall offset financial assets and financial liabilities if the Group has a legally enforceable right to set off the recognised amounts and interests and intends to settle on a net basis.

(a) Financial assets

The Group's financial assets fall into the categories discussed below, with the allocation depending to an extent on the purpose for which the asset was acquired. Although the Group uses derivative financial instruments in economic hedges of interest rate risk, it does not hedge account for these transactions. The Group has not classified any of its financial assets as held to maturity or as available for sale.

Unless otherwise indicated, the carrying amounts of the Group's financial assets are a reasonable approximation of their fair values.

(a) (i) Loans and receivables

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through rental leases with tenants (e.g. trade receivables and cash and cash equivalents), but also incorporate other types of contractual monetary assets. They are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition or issue and subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

The effect of discounting on these financial instruments is not considered to be material.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms of the receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, such impairments directly reduce the carrying amount of the impaired asset and are recognised against the relevant income category in the statement of comprehensive income.

Cash and cash equivalents are carried at cost and consist primarily of short term deposits in banks with an original maturity of three months or less.

(a) (ii) Fair value through profit or loss

This category comprises only 'in the money' financial derivatives. They are carried in the balance sheet at fair value with changes in fair value recognised in the statement of comprehensive income.

The fair value of the Group's derivatives is based on valuations as described in note 23.

(a) (iii) Derecognition of financial assets

A financial asset (in whole or in part) is derecognised either:

· when the Group has transferred substantially all the risks and rewards of ownership; or

· when it has neither transferred nor retained substantially all the risks and rewards and when it no longer has control over the asset or a portion of the asset; or

· when the contractual right to receive cash flow has expired.

(b) Financial liabilities

The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was issued and its characteristics. Although the Group uses derivative financial instruments in economic hedges of interest rate risk, it does not hedge account for these transactions.

Unless otherwise indicated, the carrying amounts of the Group's financial liabilities are a reasonable approximation of their fair values.

(b) (i) Fair value through profit or loss

This category comprises only 'out-of-the-money' financial derivatives. They are carried in the balance sheet at fair value with changes in fair value recognised in the statement of comprehensive income.

The fair value of the Group's derivatives is based on the valuations as described in note 23.

(b) (ii) Financial liabilities measured at amortised cost

Other financial liabilities include the following items:

· Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method.

· Bank borrowings are initially recognised at fair value net of attributable transaction costs incurred. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method.

(b) (iii) Derecognition of financial liabilities

A financial liability (in whole or in part) is derecognised when the Group has extinguished its contractual obligations, it expires or is cancelled. Any gain or loss on derecognition is taken to the statement of comprehensive income.

Financial instruments issued by the Company are treated as equity only to the extent that they do not meet the definition of a financial liability. The Company's ordinary shares are classified as equity instruments. For the purposes of the disclosures given in note 22 the Company considers all its share capital, share premium and all other reserves as equity. The Company is not subject to any externally imposed capital requirements.

(d) Effective interest rate method

The effective interest rate method is a method of calculating the amortised cost of a financial asset or liability and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments (including all fees or amounts paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset or liability, or, where appropriate, a shorter period.

Significant accounting estimates and judgements

The Directors make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

(a) Investment property

The gross property value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Transaction costs normally borne by the seller are not deducted in arriving at gross property value, in accordance with IAS 40. The fair value is calculated by deducting the costs normally borne by the purchaser from the gross property value. Fair value is not intended to represent the liquidation value of the property, which would be dependent upon the price negotiated at the time of sale less any associated selling costs. The fair value is largely based on estimates using property appraisal techniques and other valuation methods. Such estimates are inherently subjective and actual values can only be determined in a sales transaction.

Investment properties held for sale are measured at fair value. The Board determines that a property is available for sale where it is intended and expected to sell within one year from the date of classification as held for sale.

The fair value of the Group's investment properties and investment properties held for sale as at 31 December 2014 was £212.2 million (2013: £248.1 million). Refer to notes 12 and 13 for further details.

(b) Income and deferred taxes

The Group is subject to income and capital gains taxes in numerous jurisdictions. Significant judgement is required in determining the total provision for income and deferred taxes. There are many transactions and calculations for which the ultimate tax determination and timing of payment is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded such differences will impact the income and deferred tax provisions in the period in which the determination is made.

The Group's deferred tax liability as at 31 December 2014 was £6.2 million (2013: £6.1 million). See note 7 for further details.

The Directors estimate fair values of derivative contracts based on valuation techniques. These techniques are significantly affected by the assumptions used, including discount rates and estimates of future cash flows. The fair value of derivative contracts at the balance sheet date was £0.9 million liability (2013: £8.8 million liability). See note 23 for further details.

3. Revenue

	Group 2014 £'000	Company 2014 £'000	Group 2013 £'000	Company 2013 £'000
Rental income	15,530	-	18,239	-
Service and management charges	3,868	-	4,460	-
Interest from subsidiary undertakings (note 22)	-	7,466	-	8,515
Total	19,398	7,466	22,699	8,515

Interest from subsidiary undertakings arises from financial assets classified as loans and receivables, has been calculated using the effective interest rate method and arises on loans that have been impaired as detailed in note 11.

At 31 December 2014, the Group recognised non recoverable property operating expenditure as follows:

	31 March 2014 £'000	31 March 2013 £'000
Service charge income	3,868	4,460
Property operating expenditure	(6,148)	(6,502)
Non recoverable property operating expenditure	(2,280)	(2,042)

Property operating expenses relating to investment properties that did not generate any rental income were £0.6 million (2013: £0.3 million).

The Group leases out its investment property solely under operating leases. Leases are typically for terms of standard institutional 3/6/9 years in France and 5 + 5 years in Spain. At the balance sheet date, using the exchange rate prevailing at the balance sheet date, the Group had contracted with tenants for the following future minimum lease payments:

	2014 £'000	2013 £'000
Within one year	13,900	17,268
In the second to fifth years inclusive	48,777	53,482
After five years	36,763	4,831
Total	99,440	75,581

4. Finance income

	Group 2014 £'000	Company 2014 £'000	Group 2013 £'000	Company 2013 £'000
Bank interest income	4	3	23	17
Foreign exchange gains	-	-	447	2,504
Net gains on financial assets and liabilities held at fair value through profit or loss (note 22)	7,550	-	8,331	-
Total	7,554	3	8,801	2,521

5. Other administration costs

	Group 2014 £'000	Company 2014 £'000	Group 2013 £'000	Company 2013 £'000
Accounts and administrative fees	351	144	345	128
Non-executive Directors' fees	113	113	113	113
Auditors' remuneration for audit services	120	58	115	51
Other professional fees	773	189	617	130
Staff costs	38	-	39	-
Total	1,395	504	1,229	422

The Group has one employee. The Directors are the only key management personnel of the Group.

6. Finance costs

	Group 2014 £'000	Company 2014 £'000	Group 2013 £'000	Company 2013 £'000
Interest on bank borrowings	12,592	-	11,431	-
Loan fee amortisation	1,426	-	678	-
Foreign exchange loss	206	1,084	-	-
Net losses on financial liabilities held at fair value through profit or loss (note 22)	-	-	6,231	-
Other charges	33	1	37	2
Total	14,257	1,085	18,377	2

Other than net losses on financial liabilities held at fair value through profit or loss, finance costs arise on financial liabilities measured at amortised cost using the effective interest rate method. No other losses have been recognised in respect of financial liabilities at amortised cost other than those disclosed above.

7. Taxation

(a) Taxation on profit on ordinary activities

Company

The Company is exempt from Guernsey taxation on income derived outside of Guernsey and bank interest earned in Guernsey. A fixed annual fee of £600 is payable to the States of Guernsey in respect of this exemption. No charge to Guernsey taxation arises on capital gains. The Group is liable to foreign tax arising on activities in the overseas subsidiaries. The Company has subsidiary operations in Luxembourg, Belgium, France and Spain.

Group

The Group's tax expense for the year comprises:

	Group 2014 £'000	Group 2013 £'000
Deferred taxation
France	547	1,273
Spain	-	-
Total	547	1,273

Tax expense reconciliation
Loss for the year	(11,016)	(4,303)

Loss for the year at the tax rate of 33.33%	(3,672)	(1,434)
Less: income not taxable	(2,228)	(5,576)
Add: expenditure not taxable	1,496	2,471
Add: un-provided deferred tax asset movement	4,951	5,812
Tax charge	547	1,273

Tax at domestic rates applicable to profits in the country concerned

Group

2014

£'000

Group

2013

£'000

French taxation at 33.33%

547

1,273

Spanish taxation at 30%

(b) Deferred taxation

The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon.

	Revaluation of investment properties £'000	Accelerated tax depreciation £'000	Tax losses £'000	Interest rate swap £'000	Total £'000
At 31 December 2012	(6,636)	19,373	(6,126)	(1,897)	4,714
(Credited)/charged to profit or loss	(8,604)	11,271	(2,121)	727	1,273
Charged/(credited) to other comprehensive income	19	200	(87)	(50)	82
At 31 December 2013	(15,221)	30,844	(8,334)	(1,220)	6,069
(Credited)/charged to profit or loss	(2,550)	2,173	(119)	1,043	547
Charged/(credited) to other comprehensive income	1,038	(1,995)	525	46	(386)
At 31 December 2014	(16,733)	31,022	(7,928)	(131)	6,230

At the balance sheet date the Company has unused tax losses of £130.6 million (2013: £124.9 million). A deferred tax asset has been recognised in respect of £9.0 million of such losses (2013: £8.3 million). Due to the unpredictability of future taxable profits, the Directors believe it is not prudent to recognise deferred tax assets in respect of the revaluation of investment properties and the interest rate swap.

The French unused tax losses can be carried forward indefinitely. The Spanish unused tax losses can be carried forward for 18 years.

8. Dividends

The Company did not pay any dividend during the year (2013: £0.7 million) and does not currently propose to pay dividends.

9. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

	1 January 2014 to 31 December 2014	1 January 2014 to 30 June 2014	1 January 2013 to 31 December 2013	1 January 2013 to 30 June 2013
Losses after tax per income statement (£'000)	(11,563)	(10,009)	(5,576)	(2,672)
Basic and diluted earnings per share	(9.8)p	(8.5)p	(4.7p)	(2.3)p

Losses after tax per income statement (£'000)	(11, 563)	(10,009)	(5,576)	(2,672)
Losses/(gains) on disposal of investment properties	1,400	(300)	-	-
Revaluation losses on investment properties (notes 12 and 13)	12,416	10,298	6,934	1,025
Mark to market of currency swaps (note 22)	-	-	5,444	6,987
Mark to market of interest rate swaps (note 22)	(7,550)	(3,715)	(8,331)	(4,623)
Investment Manager's fee (capital)	706	369	828	425
Deferred taxation	547	194	1,273	730
Foreign exchange losses/(gains) (notes 4 and 6)	206	1,612	(447)	(1,622)
Adjusted (losses)/earnings	(3,838)	(1,551)	125	250
Adjusted (losses)/earnings per share	(3.3)p	(1.3)p	0.1p	0.2p

Weighted average number of ordinary shares (000's)	117,627	117,627	117,627	117,627

The adjusted earnings are presented to provide what the Directors believe is a more appropriate assessment of the operational income accruing to the Group's activities. Hence, the Group adjusts basic earnings for income and costs which are not of a recurrent nature or which may be more of a capital nature.

10. Net asset value per share

	31 December 2014	30 June 2014	31 December 2013	30 June 2013
Net asset value (£'000)	2,955	6,232	14,974	17,347
Net asset value per share	2.5p	5.3p	12.7p	14.7p

Net asset value (£'000)	2, 955	6,232	14,974	17,347
Currency hedges*	-	-	-	541
Interest rate swaps	948	4,849	8,825	12,789
Deferred taxation**	3,115	3,008	3,035	2,832
Adjusted net asset value	7,018	14,089	26,834	33,509
Net asset value per share (adjusted)	6.0p	12.0p	22.8p	28.5p

Number of ordinary shares (000's)	117,627	117,627	117,627	117,627

* The currency hedges necessarily included both a movement in relation to currency fluctuation and a movement due to relative future interest rates. For the purpose of providing an adjusted net asset value the element of valuation in relation to the interest rates was included as an adjustment; the instruments were held to maturity at which point this element unwound. The currency hedges' contracts terminated in October 2013.

**The net asset value and net asset value per ordinary share have been adjusted by 50% of the deferred tax provision. An asset realisation could potentially include the sale of an SPV with latent deferred tax liabilities for which a potential purchaser would expect some form of discount from the purchase price of the related property.

The adjusted net assets are presented to provide what the Directors believe is a more relevant assessment of the Group's net asset position. The Directors have determined that certain fair value and accounting adjustments may not be realisable in the longer term.

11. Investment in subsidiary undertakings

A list of the significant investments in subsidiaries, including the name, country of incorporation and the proportion of ownership interest is given below.

Name of subsidiary undertaking	Class of share	% of class held with voting rights	Country of incorporation	Principal activity

Alpha Pyrenees Luxembourg SARL	Ordinary	100%	Luxembourg	Holding company
Alpha Pyrenees Luxembourg No 2 SARL	Ordinary	100%	Luxembourg	Holding company
Alpha Pyrenees Belgium SA	Ordinary	100%	Belgium	Holding company
Alpha Pyrenees Evreux SARL	Ordinary	100%	France	Holding company
Alpha Pyrenees Evreux SCI	Ordinary	100%	France	Property investment
Alpha Pyrenees Athis Mons SARL	Ordinary	100%	France	Holding company
Alpha Pyrenees Athis Mons SCI	Ordinary	100%	France	Property investment
Alpha Pyrenees Offices SARL	Ordinary	100%	France	Holding company
Alpha Pyrenees Offices SCI	Ordinary	100%	France	Property investment
Alpha Pyrenees Nozay SARL	Ordinary	100%	France	Holding company
Alpha Pyrenees Nozay SCI	Ordinary	100%	France	Property investment
Alpha Pyrenees Nîmes SARL	Ordinary	100%	France	Property investment
Alpha Pyrenees Spain SLU	Ordinary	100%	Spain	Property investment
Alpha Pyrenees Alcalá SLU	Ordinary	100%	Spain	Property investment
Alpha Pyrenees Ècija SLU	Ordinary	100%	Spain	Property investment

The Group's investment properties are held by its subsidiary undertakings.

The Company has made the following loans to its subsidiary undertakings as at 31 December 2014:

	2014 Interest bearing £'000	2014 Non-interest bearing £'000	2014 Total £'000	2013 Interest bearing £'000	2013 Non-interest bearing £'000	2013 Total £'000
Loans	101,639	53,163	154,802	102,149	45,673	147,822
Impairment	(100,735)	(52,688)	(153,423)	(94,126)	(42,099)	(136,225)
Total	904	475	1,379	8,023	3,574	11,597

	2014 Interest bearing £'000	2014 Non-interest bearing £'000			2014 Total £'000		2013 Interest bearing £'000	2013 Non-interest bearing £'000		2013 Total £'000
Current	889		475	1,364		-		3,574	3,574
Non-current	15		-	15		8,023		-	8,023
Total	904		475	1,379		8,023		3,574	11,597

The loans are denominated in Euros, unsecured and are subject to a range of interest rates, fixed for the term of the relevant loan. At 31 December 2014 the weighted average interest rate was 5.47% (2013: 5.50%).

An impairment of £153.4 million (2013: £136.2 million) has been made against amounts receivable from subsidiary undertakings to reflect the current mark to market impact of the interest rate derivatives and property valuations which have arisen within the Group subsidiaries.

12. Investment properties

	2014 £'000	2013 £'000
Fair value of investment properties at 1 January	236,920	249,043
Subsequent capital expenditure after acquisition	244	945
Disposals	(8,484)	-
Movement in rent incentives/initial costs	3,927	(30)
Fair value adjustment in the year	(11,771)	(6,934)
Effect of foreign exchange	(14,352)	5,090
Transfer to investment properties held for sale	(116,941)	(11,194)
Fair value of investment properties at 31 December	89,543	236,920

The fair value of the Group's investment properties at 31 December 2014 and 31 December 2013 has been arrived at on the basis of valuations carried out at that date by Knight Frank LLP, independent valuers not connected to the Group. The portfolio has been valued on a fair value basis as defined by the Royal Institution of Chartered Surveyors Appraisal and Valuation Standards ("RICS").

The approved RICS definition of fair value is "the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date."

During the year, the Group disposed of its Gennevilliers property in France for £6.0 million (€7.4 million) and of its main warehouse at Zaragoza in Spain for £1.0 million (€1.3 million). A further disposal is described in note 13.

The Group has pledged investment properties valued at £89.5 million (€114.5 million) (2013: £236.9 million (€283.8 million)) to secure borrowings (note 17).

At 31 December 2014, the Group had un-provided contractual obligations for future repairs and maintenance of £nil (2013: £nil) and £5.3 million (2013: £nil) of future capital requirements.

13. Investment properties held for sale

	2014 £'000	2013 £'000
Investment properties held for sale at 1 January	11,194	-
Disposals	(4,269)	-
Movement in rent incentives/initial costs	(29)	-
Fair value adjustment in the year	(645)	-
Effect of foreign exchange	(555)	-
Transfer from investment properties	116,941	11,194
Investment properties held for sale at 31 December	122,637	11,194

Investment properties held for sale represent the fair value of properties that have been actively marketed for disposal at the balance sheet date.

During the year, the Group disposed of its Vitry-sur-Seine property in France for £4.6 million (€5.7 million), which was disclosed as an investment property held for sale at the year ended 31 December 2013.

The Group has pledged investment properties held for sale valued at £122.6 million (€156.7 million) (2013: £11.2 million (€13.4 million)) to secure borrowings (note 17).

14. Trade and other receivables

	Group 2014 £'000	Company 2014 £'000	Group 2013 £'000	Company 2013 £'000
Trade receivables	3,911	-	1,311	-
Amounts receivable from Property Managing Agents	1,359	-	1,442	-
Prepayments	377	5	1,032	6
Other receivables	453	-	459	-
Total	6,100	5	4,244	6

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. Note 22 provides an ageing of trade receivables along with details of the provision against loans during the year.

15. Cash and cash equivalents

Cash and cash equivalents included in the cash flow statement comprise the following balance sheet amounts:

	2014 £'000	2013 £'000
Cash at bank in the balance sheet	12,425	5,923
Cash balance held on the cash pooling account	(7,766)	-
Cash and cash equivalents	4,659	5,923

The cash balance held on the cash pooling account is subject to certain restrictions; accordingly this balance has not been classified as cash and cash equivalents for the purposes of the cash flow statement.

In November 2013, the Group entered into a cash pooling arrangement with Barclays Bank PLC over the Group's cash-flows from the whole property portfolio in order to provide further security to Barclays Bank PLC but which provides the Group and the Company with working capital for its operations. The resulting cash pooling account is controlled by Barclays Bank PLC and a cash release mechanism is in place whereby cash is released by Barclays Bank PLC following review of the Group's working capital budget, which is updated quarterly.

16. Trade and other payables

	Group 2014 £'000	Company 2014 £'000	Group 2013 £'000	Company 2013 £'000
Trade payables	351	150	310	42
Deferred income	3,704	-	695	-
Investment Manager's fee payable	585	216	680	217
VAT payable	698	-	332	-
Accruals	694	15	793	76
Total	6,032	381	2,810	335

Trade payables and accruals primarily comprise amounts outstanding for trade purchases and ongoing costs. The Group has financial risk management policies in place to ensure that all payables are paid within the credit time frame.

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

17. Bank borrowings

	Group 2014 £'000	Company 2014 £'000	Group 2013 £'000	Company 2013 £'000
Current liabilities: interest payable and bank borrowing	212,858	-	1,707	-
Non-current liabilities: bank borrowing	-	-	221,745	-
Total liabilities	212,858	-	223,452	-

The borrowings are repayable as follows:
Interest payable	1,723	-	1,707	-
On demand or within one year	211,135	-	-	-
In the second to fifth years inclusive	-	-	221,745	-
After five years	-	-	-	-
	212,858	-	223,452	-

Movements in the Group's non-current bank borrowings are analysed as follows:

	2014 £'000	2013 £'000
Opening balance	221,745	197,393
Loan advanced	2,064	20,829
Deferred finance costs	(173)	(898)
Amortisation of finance costs	1,426	678
Repayment of loan	-	(208)
Loan repayable within one year	(211,135)	-
Exchange differences on translation of foreign currencies	(13,927)	3,951
Total	-	221,745

At 31 December 2014, €221.1 million (2013: €221.1 million) was outstanding on the French borrowings. Borrowings are secured over the shares in the Company's operating subsidiaries and mortgages over properties with a total value of €250.2 million.

At 31 December 2014, €21.3 million (2013: €21.3 million) was outstanding on the Spanish borrowings, which comprises a balance of €1.3 million on a floating rate basis (at three month Euribor plus margin) and €20.0 million on a fixed rate. Borrowings are secured over the shares in the Company's operating subsidiaries and mortgages over properties with a total value of €21.0 million.

The lender, Barclays Bank PLC, has undertaken a variable to fixed rate swap with a third party to fix the interest rate paid by the Group (note 22) through to the borrowings' maturity date of 10 February 2015. The weighted average rate of interest on all fixed rate loans is 5.26% (2013: 5.26%).

On 19 November 2013, following settlement of the currency swaps, the Group entered into a new loan contract with Barclays Bank PLC for £20.8 million (€25.0 million). The Group is permitted to repay this loan at any time after repayment of the existing secured borrowings. Interest is charged at a margin of 10% above three month Euribor and will be rolled up throughout the term. Barclays Bank PLC has been provided with a charge over the Group's Nîmes property. A cash pooling arrangement over the Group's cash-flows from the whole property portfolio has been established to provide further security to the loan but which provides the Group with working capital for its operations. No arrangement fees have been incurred. As part of the arrangements, the loan-to-value covenants on all the Group's existing secured facilities of €242.4m have been waived. At 31 December 2014, the outstanding principal balance of this loan was €27.6 million (2013: €25.0 million).

The repayment date of all borrowings, originally due on 10 February 2015, has been reset to 11 May 2015, following agreement with Barclays Bank PLC. A fee of 0.5% of the borrowed amount is being charged by Barclays Bank PLC for this extension period and this will be payable on 11 May 2015. The current interest rates will continue to apply to the facilities during the extension period.

18. Share capital

Authorised share capital

The Company's authorised share capital is unlimited.

Issued and fully paid

	Number of shares
At 1 January 2013	117,627,056
Shares cancelled/issued during the year	-
At 31 December 2013	117,627,056
Shares cancelled/issued during the year	-
At 31 December 2014	117,627,056

The Company has one class of shares which carry no right to fixed income. All ordinary shares have nil par value.

19. Reserves

The movements in the reserves for the Group and the Company are shown above.

Special reserve

On 9 December 2005, the Royal Court of Guernsey confirmed the reduction of the Company's capital by way of cancellation of the amount standing to the credit of its share premium account on that date. The amount was transferred to the special reserve. The special reserve is a distributable reserve to be used for all purposes permitted under Guernsey company law, including the buyback of shares and payment of dividends.

Translation reserve

The translation reserve contains exchange differences arising on consolidation of the Group's overseas operations. These amounts may subsequently be reclassified to profit or loss.

Capital reserve

The capital reserve contains gains and losses on the disposal of investment properties, and increases and decreases in the fair value of the Group's investment properties and currency swap derivative financial instruments, together with expenses allocated to capital.

Revenue reserve

Any surplus arising from net profit after tax is taken to this reserve, which may be utilised for the buyback of shares and payment of dividends.

20. Events after the balance sheet date

On 10 February 2015, the Group agreed a three month extension with Barclays Bank PLC of all borrowing facilities, which are therefore due to mature on 11 May 2015 (see note 17).

21. Related party transactions

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. Alpha Real Capital LLP is the Investment Manager to the Company under the terms of the Investment Manager Agreement and is thus considered a related party of the Company.

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

The Investment Manager is entitled to receive a fee from the Group at an annual rate of 1 per cent of the gross assets of the Group, payable quarterly in arrears. The Investment Manager is also entitled to receive an annual performance fee calculated with reference to total shareholder return ("TSR"), whereby the fee is 20 per cent of any excess over an annualised TSR of 12 per cent and then a further 15 per cent of any excess over 20 per cent; the performance fee is subject to a three year high watermark with a minimum threshold of 100 pence. Details of the investment management fees for the current accounting period are shown on the face of the statement of comprehensive income and any balances outstanding are disclosed separately in note 16.

The Directors of the Company received fees for their services as detailed below.

Directors fees	2014 £'000	2013 £'000
Dick Kingston (Chairman)	30	30
David Jeffreys	23	23
Phillip Rose	20	20
David Rowlinson*	20	20
Serena Tremlett	20	20
Total	113	113

*David Rowlinson is a director of Antler Investment Holdings Limited ("Antler") and the managing director of Liberation Management Limited, which is a trustee of the Rockmount Purpose Trust that indirectly is a partner of Alpha Real Capital LLP. As such he is considered to be in a position in which he is able to exercise significant influence over the Investment Manager.

Serena Tremlett is also the Managing Director and a major shareholder of Morgan Sharpe Administration Limited, the Company's administrator and secretary. During the year the Company paid Morgan Sharpe Administration Limited fees of £81,000 (2013: £81,000).

Directors' shareholdings in the Company are detailed in the Directors' and corporate governance report.

The following, being partners of the Investment Manager, hold or have an interest in the following shares in the Company at 31 December 2014:

	2014 Number of shares held	2013 Number of shares held
Rockmount Ventures Limited and ARRCO Limited***	21,437,393	21,437,393
P. Rose****	1,290,079	1,290,079
B. Bauman	544,809	544,809
B. Frith	229,078	229,078
K. Devon-Lowe	108,650	24,650
R. Armist	7,450	7,450

***Rockmount Ventures Limited is the parent company of ARRCO Limited. The interest attributed to the two corporate partners represents 21,437,393 shares held by a related party, Antler. As such these companies are considered to be in a position in which they are able to exercise significant influence over the Investment Manager.

****Phillip Rose is the CEO and a partner of the Investment Manager.

At 31 December 2014, Alpha Real Capital LLP, the Investment Manager of the Company, held 9,390,800 shares in the Company (2013: 9,400,000).

Paul Cable, being the Investment Manager's Fund Manager responsible for the Company's investments, holds 84,918 (2013: 84,918) shares in the Company.

22. Financial instruments risk exposure and management

In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.

There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.

Principal financial instruments

The principal financial instruments used by the Group and Company, from which financial instrument risk arises, are as follows:

	Financial assets and liabilities carrying value
	Group 2014 £'000	Company 2014 £'000	Group 2013 £'000	Company 2013 £'000
Current financial assets
Trade and other receivables (excluding prepayments)	5,723	-	3,212	-
Cash and cash equivalents	12,425	1,801	5,923	3,565
Amounts receivable from subsidiary undertakings	-	1,364	-	3,574
Total current financial assets	18,148	3,165	9,135	7,139

Non-current financial assets
Amounts receivable from subsidiary undertakings	-	15	-	8,023
Total non-current financial assets	-	15	-	8,023
Total financial assets	18,148	3,180	9,135	15,162

Current financial liabilities
Trade and other payables (excluding deferred income)	2,328	381	2,115	335
Interest rate swap	948	-	-	-
Bank borrowings	212,858	-	1,707	-
Rent deposits	730	-	1,057	-
Total current financial liabilities	216,864	381	4,879	335

Non-current financial liabilities
Interest rate swap	-	-	8,825	-
Bank borrowings	-	-	221,745	-
Rent deposits	952	-	1,094	-
Total non-current financial liabilities	952	-	231,664	-
Total financial liabilities	217,816	381	236,543	335

Net changes in realised and unrealised gains or losses on financial instruments can be summarised as follows:

	Group 2014 £'000	Company 2014 £'000	Group 2013 £'000	Company 2013 £'000
Net change in realised gains or losses on loans and receivables
Interest from subsidiary companies (note 3)	-	7,466	-	8,515
Bank interest income	4	3	23	17
Impairment of trade and other receivables	(278)	-	(238)	-
Movement in impairment of amounts receivable from subsidiary undertakings (note 11)	-	(17,198)	-	(14,564)
Total	(274)	(9,729)	(215)	(6,032)

Net change in unrealised gains and losses on financial assets and liabilities held at fair value though profit or loss
Interest rate swaps	7,550	-	8,331	-
Net realised gains and losses on financial assets and liabilities held at fair value through profit or loss
Currency swaps	-	-	(5,444)	-
Currency swaps - interest received	-	-	7,401	-
Currency swaps - interest paid	-	-	(8,188)	-
Net expense of currency swaps	-	-	(6,231)	-

Net gain on financial assets and liabilities held at fair value through profit or loss	7,550	-	2,100	-

Disclosed as:
Finance costs (note 6)	-	-	(6,231)	-
Finance income (note 4)	7,550	-	8,331	-
Net gain on financial assets and liabilities held at fair value through profit or loss	7,550	-	2,100	-

	Group 2014 £'000	Company 2014 £'000	Group 2013 £'000	Company 2013 £'000
Interest from subsidiary companies	-	7,466	-	8,515
Bank interest income	4	3	23	17
Interest on bank borrowings	(12,592)	-	(11,431)	-
Loan fee amortisation	(1,426)	-	(678)	-
Total interest (expense)/income	(14,014)	7,469	(12,086)	8,532

General objectives, policies and processes

The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function.

The overall objective of the Board is to set polices that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. The above financial risk management policies apply equally to the Group and the Company. Further details regarding these policies are set out below.

Credit risk

Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the balance sheet date.

a) Group

The Group's credit risk principally arises from cash and cash equivalents as well as credit exposures with respect to tenants including other receivables. In the event of a default by an occupational tenant, the Group will suffer a rental shortfall and incur additional costs in maintaining, insuring and re-letting the property until it is re-let. General economic conditions may affect the financial stability of tenants and prospective tenants and/or demand for and value of real estate assets. A property advisor monitors the tenants in order to anticipate and minimise the impact of default by occupational tenants. Where possible, tenants' risk is mitigated through rental guarantees.

Alcatel-Lucent is the largest tenant within the portfolio representing 59.4% (2013: 52.1%) of the annual contracted rent as at 31 December 2014. The tenant's next break option is in August 2023. The Group meets with the tenant frequently and monitors its financial performance closely.

The ageing of trade receivables is as follows:

	2014 £'000	2013 £'000
0 to 6 months	3,911	1,311
Over 6 months	-	-
	3,911	1,311

The movement in impairments to trade receivables of £0.3m (2013: £0.2m) is shown on the table above.

There are no other impairment losses on any other financial assets other than loans and receivables as mentioned above.

The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Group's maximum exposure to credit risk without taking into account the value of rent deposits obtained. Details of the Group's receivables are summarised in note 14 of the financial statements.

The Group policy is to maintain its cash and cash equivalent balances with a reasonable diversity of banks. The Board monitors the placement of cash balances on an ongoing basis and has policies to limit the amount of credit exposure to any financial institution. As at 31 December 2014, the Group had spread its cash across seven financial institutions and had not placed more than 66% in any one bank.

b) Company

The Company's credit risk principally arises from cash and cash equivalents and amounts receivable from subsidiaries. The Company follows the same Group policy with regards to diversification of banking arrangements. Amounts receivable from subsidiaries are of mainly a long term nature and the loans are monitored on a regular basis.

The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Company's maximum exposure to credit risk. Details of the Company's loans and receivables are summarised in notes 11 and 14 of the financial statements.

Liquidity risk

Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The Group and Company have developed procedures with the object of minimising such losses such as maintaining sufficient cash and other highly liquid current assets and by having in place an adequate amount of committed credit facilities. Cash and cash equivalents are placed with financial institutions on a short term basis reflecting the Group's and Company's desire to maintain a high level of liquidity in order to enable timely completion of investment transactions.

The cash pooling account is controlled by Barclays Bank PLC and a cash release mechanism is in place whereby cash is released by Barclays Bank PLC following review of the Group's working capital budget, which is updated quarterly. This allows the Group to settle its liabilities for working capital requirements in a timely manner.

a) Group

The following table illustrates the contractual maturity analysis of the Group's financial liabilities based, where relevant, on balance sheet interest rates and exchange rates prevailing at the balance sheet date.

2014	Within 1 year £'000	1-2 years £'000	2-5 years £'000	Over 5 years £'000	Total £'000	Total carrying amount £'000
Trade and other payables (excluding deferred income)	2,328	-	-	-	2,328	2,328
Rent deposits	730	36	489	427	1,682	1,682
Bank borrowings	212,858	-	-	-	212,858	212,858
	215,916	36	489	427	216,868	216,868

2013	Within 1 year £'000	1-2 years £'000	2-5 years £'000	Over 5 years £'000	Total £'000	Total carrying amount £'000
Trade and other payables (excluding deferred income)	2,115	-	-	-	2,115	2,115
Rent deposits	1,057	271	373	450	2,151	2,151
Bank borrowings	1,707	221,745	-	-	223,452	223,452
	4,879	222,016	373	450	227,718	227,718

b) Company

The Company only has trade payables and other payables which are payable within one year.

Market risk

a) Foreign exchange risk

The Group operates in Europe and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to Euros. Foreign exchange risk arises from future commercial transactions, recognised monetary assets and liabilities and net investments in foreign operations.

The Group had entered into currency swaps to hedge foreign currency transactions and cash flows to safeguard the equity investments of shareholders against significant adverse movements between Sterling and Euros.

The currency swaps' contracts, due to terminate on 16 October 2013, were closed earlier, on 11 October 2013, following agreement with Barclays Bank PLC. As a result of this agreement, the net settlement liability for the Group with Barclays Bank PLC was £21.0 million (€24.7 million).

In October 2013, the Group reached agreement with Barclays Bank PLC to finance the outstanding hedge liability through to 10 February 2015, subsequently extended to 11 May 2015, a date coterminous with the current borrowings, also provided by Barclays Bank PLC, which are secured against the Group's property portfolio. The finance is provided in the form of a Euro denominated loan, which was signed and drawndown on 19 November 2013, of £20.8 million (€25.0 million), including interest accruing on the deferral of the settlement from 11 October 2013. Further information on this loan has been given in Note 17 above.

The Group's policy is, where possible, to allow Group entities to settle liabilities denominated in their functional currency (primarily Euros or Sterling) with the cash generated from their own operations in that currency.

As the property portfolio is acquired and mortgaged in Euros the Board considers it appropriate from a risk perspective to review currency exposure on a net assets basis. For illustrative purposes, therefore, the effect of a strengthening of the Euro by 5 cents would increase Group net assets by £0.1 million (2013: increase by £0.7 million). A weakening of the Euro by 5 cents would decrease net assets by £0.1 million (2013: decrease by £0.6 million).

As the Company impairs its large intercompany loan book to reflect the underlying net asset value of its Group companies, the overall net asset sensitivity of the Company to foreign currency movements is the same as the Group's above.

b) Cash flow and fair value interest rate risk

The Group's principal interest rate risk arises from long-term borrowings; the Group has interest rate swaps as disclosed below.

The Group was required under the financing agreements with Barclays Bank PLC to fix the rate at which it borrowed over the duration of each loan.

Barclays Bank PLC has undertaken a variable to fixed rate swap with a third party. The Company is not party to the swap agreement but via the financing agreement the Company has all the risks and rewards of the swap as, should the loan be repaid early, the Company would be required to pay the swap break costs or, alternatively accrue a swap benefit as a capital reduction depending on the value of the underlying swap at that point in time.

On 16 December 2009, the Spanish bank loan with Barclays Bank PLC was amended and restated. As a result of the amendments, the interest rate swap was broken and a new interest swap agreed for the longer term of the revised loan. Of the loan principal of €22.7m, interest on €20.0m has been fixed using the new swap.

Note 23 details how the interest rate swaps are valued.

The Group's cash flow is regularly monitored by the Group's management.

For the Group, an increase of 100 basis points in interest rates would result in an increased post-tax loss of £0.1 million (2013: £0.1 million). A decrease in 100 basis points in interest rates would result in a reduced post-tax loss for the period of £0.1 million (2013: £0.1 million).

For the Company, an increase of 100 basis points in interest rates would result in a decreased post-tax loss of £0.1 million (2013: £0.1 million). A decrease in 100 basis points in interest rates would result in an increased post-tax loss for the period of £0.1 million (2013: £0.1 million).

The sensitivity analyses above are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated - for example, change in interest rate and change in market values.

c) Growth in rental income and defaults

Income growth may not continue at a consistent rate. Future income is dependent on, amongst other things, the Group negotiating suitable rent levels when compared to associated financing costs.

d) Capital risk management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Consistent with others in the industry, the Board monitors capital on the basis of the gearing ratio in the currency in which properties and associated borrowings are held and takes action where appropriate. The key focus is the net leverage ratio which is shown below.

The net leverage ratios at 31 December 2014 and at 31 December 2013 were as follows:

	Group 2014 €'000	Group 2013 €'000
Total borrowings	270,038	267,400
Less: cash and cash equivalents	(15,879)	(7,096)
Net debt	254,159	260,304

Property valuation	271,166	297,240

Net leverage ratio	93.7%	87.6%

The Company has no borrowings; all borrowings are by subsidiaries within the Group.

e) Fair values

The following methods and assumptions are used to estimate fair values:

· Cash and short-term deposits, trade receivables, trade payables and other current liabilities approximate their carrying amounts due to the short-term maturities of these instruments.

· The fair value of floating rate borrowings is estimated by discounting future cash flows using rates currently available for debt of similar terms and remaining maturities.

· The fair value of fixed rate borrowings is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. The fair value approximates their carrying values gross of unamortised transaction costs.

As a result the carrying values less impairment provision of loans and receivables and financial liabilities measured at amortised cost are approximate to their fair values.

Note 23 contain details regarding the fair value measurement of the interest rate swaps.

23. Fair value measurement

IFRS 13 requires disclosure of the fair value measurement of the Group's assets and liabilities, the related valuation techniques, the valuations' recurrence and the inputs used to assess and develop those measurements.

The Group discloses fair value measurements by level of the following fair value measurement hierarchy:

· Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

· Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

· Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

The level in the fair value hierarchy within which the asset or liability is categorised is determined on the basis of the lowest input that is significant to the fair value measurement. Assets and liabilities are classified in their entirety into one of the three levels.

Investment properties and interest rate swaps are valued on a recurring basis: investment properties are valued half yearly and interest rate swaps are valued quarterly.

The fair value of the derivative interest rate swap contracts is determined by reference to the mid-point of the yield curves prevailing on the reporting date and represents the net present value of the differences between the contracted rate and the valuation rate when applied to the projected balances to the period from the reporting date to the contracted expiry date.

The Group's valuers derive the fair value by applying the methodology and valuation guidelines as set out by the Royal Institution of Chartered Surveyors in the United Kingdom in accordance with IAS 40. This approach is based on discounting the future net income receivable from properties to arrive at the net present value of that future income stream. Future net income comprises the rent secured under existing leases, less any known or expected non-recoverable costs and the current market rent attributable to vacant units. The consideration basis for this calculation excludes the effects of any taxes on the net income. The discount factors used to calculate fair value are consistent with those used to value similar properties with comparable leases in each of the respective markets. A decrease in the net rental income or an increase in the discount rate will decrease the fair value of the investment property.

The following table shows an analysis of the fair values of assets and liabilities recognised in the balance sheet by level of the fair value hierarchy described above:

31 December 2014	Assets and liabilities measured at fair value
	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Assets measured at fair value
Investment properties	-	-	212,180	212,180

Assets for which fair values are disclosed
Trade and other receivables	-	6,100	-	6,100

Liabilities measured at fair value
Interest rate swap	-	(948)	-	(948)

Liabilities for which fair values are disclosed
Current
Trade and other payables	-	(6,032)	-	(6,032)
Bank borrowings	-	(212,858)	-	(212,858)
Rent deposits	-	(730)	-	(730)

Non-current
Bank borrowings	-	-	-	-
Rent deposits	-	(952)	-	(952)

Total	-	(215,420)	212,180	(3,240)

31 December 2013	Assets and liabilities measured at fair value
	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Assets measured at fair value
Investment properties	-	-	248,114	248,114

Assets for which fair values are disclosed
Trade and other receivables	-	4,244	-	4,244

Liabilities measured at fair value
Interest rate swap	-	(8,825)	-	(8,825)

Liabilities for which fair values are disclosed
Current
Trade and other payables	-	(2,810)	-	(2,810)
Bank borrowings	-	(1,707)	-	(1,707)
Rent deposits	-	(1,057)	-	(1,057)

Non-current
Bank borrowings	-	(221,745)	-	(221,745)
Rent deposits	-	(1,094)	-	(1,094)

Total	-	(232,994)	248,114	15,120

The Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

There were no transfers between level 1 and level 2 fair value measurements.

Movements in level 3 of the fair value measurements, during the year ended 31 December 2014, can be summarised as follows:

	2014
	£'000
At 1 January	248,114
Acquisitions during the year at cost	0
Subsequent capital expenditure after acquisition	244
Disposals	(11,353)
Loss recognised in profit or loss	(1,400)
Rent incentives movement	3,898
Fair value adjustment	(12,416)
Effect of foreign exchange	(14,907)
At 31 December	212,180

The fair value of investment properties is based on unobservable inputs and it is therefore disclosed as level 3. The following methods, assumptions and inputs were used to estimate fair values of investment properties:

31 December 2014
Class of investment properties	Carrying amount / fair value '000	Area (square meters)	Valuation technique	Significant unobservable inputs	Range	Weighted average
Europe	£212,180 (€271,166)	250,180	Income capitalisation	Gross ERV per sqm p.a.	€24 / €180	€91.1
				Net initial yield	(2.1%) / 9.4%	6.4%
				Reversionary yield	5.6% / 12.4%	7.6%
				Gross equivalent yield	7.0% / 10.8%	8.3%

31 December 2013
Class of investment properties	Carrying amount / fair value '000	Area (square meters)	Valuation technique	Significant unobservable inputs	Range	Weighted average
Europe	£248,114 (€297,240)	262,100	Income capitalisation	Gross ERV per sqm p.a.	€21 / €219	€93.7
				Net initial yield	(2.1%) / 8.9%	6.5%
				Reversionary yield	5.2% / 11.3%	7.7%
				Gross equivalent yield	6.6% / 10.0%	8.2%

The Directors assessed at the balance sheet date whether the Group's investment properties are being exploited according to their highest and best use and they are satisfied that this is the case.

Property risk

The properties have been valued by an independent third party (see note 12) and the fair value has been arrived at on the basis of a sale between a willing buyer and willing seller. Should the Group be required to dispose of its investment properties not as a willing seller the sale proceeds could vary.

Company

The Company did not have any financial assets or financial liabilities at fair value through profit or loss.

Directors and Trust information

Directors

Dick Kingston (Chairman)
David Jeffreys
Phillip Rose

David Rowlinson
Serena Tremlett

Registered office

Old Bank Chambers

La Grande Rue

St Martin's

Guernsey GY4 6RT

Investment Manager

Alpha Real Capital LLP
Level 6, 338 Euston Road
London NW1 3BG

Administrator and secretary

Morgan Sharpe

Administration Limited

Old Bank Chambers

La Grande Rue

St Martin's

Guernsey GY4 6RT

Broker

Peel Hunt LLP

Moor House

120 London Wall

London EC2Y 5ET

Independent valuers

Knight Frank LLP
55 Baker Street
London W1U 8AN

Independent auditor

BDO Limited
Place du Pré, Rue du Pré
St Peter Port
Guernsey GY1 3LL

Tax advisors

BDO LLP
55 Baker Street
London W1U 7EU

Deloitte LLP
Hill House
1 Little New Street
London EC4A 3TR

Legal advisors in Guernsey

Carey Olsen
PO Box 98

Carey House
Les Banques
St Peter Port
Guernsey GY1 4BZ

Legal advisors in the UK

Norton Rose

3 More London Riverside

London SE1 2AQ

Registrar

Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier
Jersey JE1 1ES

Shareholder information

Dividends

Ordinary dividends, if declared, are paid quarterly. Shareholders who wish to have dividends paid directly into a bank account rather than by cheque to their registered address can complete a mandate form for this purpose. Mandates may be obtained from the Group's Registrar. Where dividends are paid directly to shareholders' bank accounts, dividend vouchers are sent directly to shareholders' registered addresses.

Share price

The Company's Ordinary Shares are listed on the London Stock Exchange.

Change of address

Communications with shareholders are mailed to the addresses held on the share register. In the event of a change of address or other amendment, please notify the Company's Registrar under the signature of the registered holder.

Investment Manager

The Company is advised by Alpha Real Capital LLP which is authorised and regulated by the Financial Conduct Authority in the United Kingdom.

Financial Calendar

Financial reporting	Reporting/Meeting dates
Annual results announcement	13 March 2015
Annual report published	2 April 2015
Annual General Meeting	24 April 2015
First trading update statement (Qtr 1)	5 June 2015
Half year report	18 August 2015
Second trading update statement (Qtr 3)	13 November 2015

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR SFLFAEFISEDD

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